Protectionism

Proposed Tariff on Washing Machines Is Pure Protectionism

Protectionist measures hurt American workers and consumers.

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RICHARD B. LEVINE/Newscom

If Whirlpool gets its way, the U.S. International Trade Commission (ITC) will recommend some tariffs on washing machines that could put economic growth through the wringer, costing jobs and raising consumer prices.

The Michigan-based appliance manufacturer filed a petition with the ITC in April, claiming that the South Korean companies Samsung and LG used unfair trade practices to sell Americans washing machines at lower prices than offered by domestic companies. In September, the ITC voted 4–0 in favor of Whirlpool, and now the White House awaits its recommendations. (Whirlpool, for its part, says it wants a 50 percent tariff.)

With potential tariffs on the horizon, American manufacturing jobs could be at risk.

In the last year, both Samsung and LG announced plans to expand manufacturing jobs in the United States. LG announced in February that it would build a $250 million factory in Clarksville, Tennessee, providing 600 jobs. In June, Samsung decided to build a $380 million factory in Newberry, Soth Carolina, providing 950 jobs.

Rep. Ralph Norman (R–S.C.), whose district includes Newberry, has been vocal in his opposition to washing machine tariffs or quotas.

"Higher prices and lower demand results in diminished employment at the manufacturer level, and broad economic harm to the affected communities, like Newberry," the congressman testified to the ITC last month. He said the planned Samsung jobs would replace the 325 lost when a local Caterpillar plant announced last year that it would close.

Norman hopes to dissuade the ITC from recommending the 50 percent tariff that Whirlpool requested. Such a measure, he points out, woud not just mean fewer jobs in his home district; it would increase prices for consumers across America.

Imposing trade barriers would mean invoking Section 201 of the Trade Act of 1974, which gives the president the power to impose temporary tariffs on goods that come into the country at such volume that they harm America's domestic market. The last time this happened was in 2003, when George W. Bush imposed tariffs on steel imports. That decision cost an estimated 200,000 jobs, according to an study from Trade Partnership Worldwide, an economic consulting firm.

A similar dispute was litigated recently when two bankrupt solar panel manufacturers, Suniva and Solarworld, asked for protectionist tariffs against steel imports from China. The ITC voted in favor of Suniva and Solarworld, though the recommendation of tariffs ranging from 10 to 35 percent were less drastic than the two companies desired. The Trump administration has yet to act on the proposal.

"The government is trying to pick winners and losers with Whirlpool trade case, but the real losers are American consumers," Norman said at a Monday event hosted by the R Street Institute, a D.C.–based think tank. "The outcome of this case will have substantial ramifications on trade, and not just for Newbury."

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  1. “The Michigan-based appliance manufacturer filed a petition with the ITC in April, claiming that the South Korean companies Samsung and LG used unfair trade practices to sell Americans washing machines at lower prices than offered by domestic companies”

    What were the unfair trade practices that were alleged?

    1. Samsung and LG are willing to accept lower margins than Whirlpool. Whirlpool has a right to the margins it wants.

      1. No. Whirlpool has a right to expect South Korea to live by the terms of the trade agreement. Enforcing agreements is not protectionism. If South Korea didn’t like the agreement, they should not have made it.

      2. I just read a Morning Star report. LG and Samsung have been accused of ‘dumping’, which is basically what you just said. In a real free trade environment, Whirlpool could respond in kind. But, in the managed trade environment that we have Whirlpool would face sanctions by South Korea if they responded in kind.

        This would be a good time to discuss how we should move toward ‘free trade’ instead of the ‘managed trade’ that keeps getting defended under the fraudulent notion that it is in fact ‘free trade’.

        1. I would love to have someone explain how “managed trade” is any better or different than old-fashioned protectionism. What are the objections to protectionism? The big objection is that it allows the government to pick winners and losers and try and manage the economy. Managed trade does exactly the same thing. But, it is somehow okay because well its just different.

          1. It’s different because managed trade is in our favor, generally, and it reduces prices by making other nations less competitive. We are actively bending things in our favor, when otherwise they would not be.

            Basically they hobble foreign trade so that foreign manufacturers lack of things like environmental controls or labor protections (that Americans like) don’t make them actually competitive.

            1. I forgot to address the other side of the coin, that being ‘pure protectionism’, which would be a complete embargo on all foreign trade.

            2. Helping our economy by making other nations less competitive is also known as Protectionism. Not sure if you were being ironic here, but if not, yes I see your point.

            3. Please to expand on your point. In this situation, the American manufacturer is at the disadvantage and I doubt that South Korea lacks the same environmental and labor protections as the US.

              Could you expand on how managed trade is designed to benefit the US and the expense of other countries. I do want to understand your point, because it’s a question that I have not been able to answer

              1. I noted further down that I couldn’t say with confidence in the particular case of South Korea, and that this is a more generalized statement.

                In this particular case, what South Korea appears to be accused of is dumping essentially surplus stock at far below market rates on American (and other nations) markets. This here seems to confirm it from the Fox Business article.

                To combat what it has charged is unfair competition, Whirlpool has sought and won rounds of tariffs from U.S. regulators in recent years.

                But each time, Samsung and LG have been able to avoid the tariffs by moving production — first from Mexico and South Korea to China. Faced with the most recent U.S. tariffs last year, Samsung and LG moved washer production to Vietnam and Thailand, rendering American trade actions moot.

                So, yes, it does appear that Samsung and LG are pulling some creative, but potentially legal, actions here to specifically undercut markets by constantly relocating their production to the most favorable locations. I suspect that this is primarily to avoid the tariffs, but it’s likely not a coincidence that labor rates and environmental rules in those nations are far, far less onerous. Otherwise, how could they move their entire production chain so readily?

                1. And, just to point it out, at face value if Samsung and LG are able to remain competitive even while constantly shifting their entire production chain it should raise some eyebrows regarding how competitive an American business really is.

  2. First of all, unless you can explain why the ITC was wrong, this is not a protectionism issue. This is a trade agreement enforcement issue. This has nothing to do with US protectionism. The Whirlpool case is about whether South Korea kept its end of the trade agreement. At least according to the ITC, it didn’t. Supporting the enforcement of trade agreements as written is not being protectionist.

    Second, yes, higher prices probably will lower demand for washing machines. How much they will lower demand is an open question. It depends on what the demand curve for washing machines looks like and how much higher the prices will be. Nothing in this article explains what those numbers are. Whatever they are, you cannot just automatically assume that higher prices will cost jobs. It may be that the prices do not increase enough to depress demand significantly. Moreover, even if it does, the lost demand would not necessarily translate into more lost jobs than forcing foreign corporations to build plants here would create. It might, but I seriously doubt it.

    Maybe the higher cost of washing machines depresses spending in other areas enough to cost jobs. That is possible. But if that is true, then the demand for machines will not be dropping, because if it did, the total amount of money spent on machines would not increase.

    There is a lot wrong with this article.

    1. I too found it odd that they say right up from that the ITC found in favor of Whirlpool but then there was no follow up with the reason whatsoever. Shoddy journalism at it’s finest.

    2. Doesn’t matter. Tarrifs hurt consumers. Even if Whirlpool were smacked with a 200% tarrif in Asia, or fined for the CEO being white, or whatever, it is still better not to impose tarrifs on imports with which they compete here.

      1. it’s a balancing act, since Whirlpool would go out of business overnight if free markets were allowed to function with our current domestic laws on labor being what they are. This is a fact.

        The tariff does indeed hurt consumers, I don’t deny that. I’m merely pointing out that foreign labor regulations make us non-competitive unless we do away with things like the minimum wage, OSHA, workman’s comp, voluntary employment, right to work, etc.

        Thus, on equal footing if we don’t change extremely popular protections on labor all jobs leave America overnight. Do you see the United States deciding that generous labor protections should go the way of the dinosaur any time soon?

        1. I don’t think that’s true. Most things I know about our trade agreements tend to be unfavorable to us. In some we’ve arranged mirrored/reciprocal tariff rates etc, but in every case where they’re not mirrored we usually have lower tariffs than the foreign country. How is that to our manufacturers advantage? It’s not.

          In reality I think 95% of the manufacturing left in the USA is not because of cronyism, but are in industries where the cost advantages are so great for manufacturing in the USA for one reason or another, at least for our domestic consumption. Appliances are big and bulky to ship, hence are still made here because shipping would be too pricey. We make lots of plastics here too, mainly because we have some of the best oil extraction and refining capacity in the world. Etc etc etc.

          While I do think we should shit can all our stupid over regulation, what little “run of the mill” manufacturing we have left is not because we bent over foreign nations in our favor, and I don’t think most of what is left would go anywhere if we dropped all current agreements for true free trade. I think we’d probably have MORE manufacturing since tariff rates in foreign countries are usually to our disadvantage.

      2. I do not buy into the one sided “we should be completely open, even if nobody else is” argument. Economics is war in peacetime, and all nations have always looked at it this way. I think one is a FOOL to believe that other countries are simply looking at it all as business as usual like we are. China and others certainly do not.

        They are literally running their economies in such ways that they are intentionally destroying foreign competition, and sustaining short term loses to do so (like in steel) specifically to weaken rivals and benefit them long term. In the real world I don’t think it’s a good idea for us to saaay lose 100% of our steel production. Maybe we don’t need to prop it up to the point of trying to keep it going like it was at its peak, but there’s somewhere in between that’s prudent for security purposes and economic purposes.

        People with your views are very naive IMO because you’re missing the fact that business is MORE than just business in the real world. If everybody looked at it like we do in the west now it’d be fine, but they don’t.

  3. If Trump really wanted to get bold he’d repeal the stupid EPA mandate on the low-water frontloaders that you gotta run twice to get the stink out of your clothes. Not that the appliance manufacturers would support the idea of replacing those expensive-ass pieces of shit with good old fashioned top loaders. And do something about the low-flow toilets and showers that don’t work for shit while you’re at it. Well, the toilets don’t work for shit, I can tell you that, I don’t shit in the shower so maybe the showers do work for shit.

    1. THIS a thousand times. And it is not the EPA that did that. It was DOE. You see you need to wash your clothes twice where once used to suffice because washing your clothes kills polar bears.

    2. Front loaders suck. Your clothes stink because mold builds up in the door and the drum. Go with a top loader like someone that doesn’t want to stink should do.

      1. Love my front loader

        2.5 years, no stink

        Just leave the door open and every month or two run its self cleaning cycle.


  4. With potential tariffs on the horizon, American manufacturing jobs could be at risk.

    False. American manufacturing jobs are already at risk because of domestic labor policy that puts us at a massive disadvantage to certain foreign nations labor. This is a fact.

    I can’t say it’s a fact in the particular case of South Korea, but as a general rule it is factually true of nations without expansive labor protections. This is especially true of centralized, and especially communist, economies.

  5. Tariffs only hurt greedy corporations and consumers who don’t care about their fellow Americans. Libertarian free trade dogma and Libertarian open borders dogma are components of the same religion of self sacrifice. America needs a 100% tariff on all imports. America needs to ban foreign call centers.

    America needs to isolate itself, especially from foreign wars.

    1. Have you been drinking? Are you being sarcastic?

  6. What do politicians do with the donations they get from the washing machine lobby?

    Launder it.

    1. No one has come up with a good way to deter gents from taking such shady donations.

  7. This comes down to the government imposing taxes and telling you from whom you can or cannot buy. You can argue whether that is good or not, but you cannot be in favor of it while claiming to be a small government libertarian or conservative.

    1. You can be in favor of it if you are conservative. If you are a strict libertarian, then no. But protectionism or nationalistic trade practices are not necessarily inconsistent with being a conservative. The people who claim otherwise are just dimwitted conservatives who are not principled enough to be libertarians. That sort of conservative is all about “freedom” and “principles” until it comes to drugs or gambling or sex usually or whatever else they don’t like.

      1. You can actually be ‘for’ it as a Libertarian as well, unless you’re somehow of the opinion that the entire world is libertarian. Libertarianism, once again, is not a terribly valuable lens in an international context.

        When considering domestic trade, absolutely. Internationally, though, Libertarianism doesn’t have great answers in the real trade environment vs. some theoretical trade environment.

        1. I think you can too if you do not think Libertarianism requires an adherence to transnationalism and a rejection of the nation-state.

          1. Fundamentally humanity will create a nation state every time, so if someone rejects the notion of the nation state they are rejecting objective truths about humanity.

            That doesn’t end well.

        2. Exactly. Even though I’m theoretically for absolute free trade, and think it would probably work pretty good, that’s not what we have. The people who make the argument of “But we have to lower all our impediments first even if nobody else does!” are idiots. That just fucks you extra hard, and helps out your rivals. It matters whether you put the horse before the cart in some situations. Sometimes you can incrementally make changes in a libertarian direction, or sometimes you can go full bore right from the get go, but in multilateral situations you can’t always stick your dick in the chopping block and hope the other guy does the right thing by not lopping it off.

          I think it’s fair to compare it to nuclear weapons. It’d be good if everybody got rid of all of them, so having an agreement that everybody lowers their supply is good. But would it have been a great idea to “take the high road” and get rid of all of ours first in 1975 to show the USSR the “right way to do it?” I think anyone can see how fucking stupid an idea that would have been! I think trade tariffs are like that. We should be forcing everybody else to drop tariffs, and drop ours on them at the same time. One sided lowering has NOT helped the US economy.

  8. Just left a comment on the Whirlpool web site. Felt good, but I know it won’t do any good.

    I see you are in favor of taxing Americans to prop up your company with higher prices, ie, tariffs on the overseas competition. Rest assured that you have just been struck off my list of potential washers and dryers when my current 15 year old Maytag set eventually dies. If you would rather corrupt the marketplace with cronyism, then I refuse to do business with you.

  9. At Reason trade agreements good, like NAFTA. But enforcing trade agreements bad, when the violation is perpetrated against the U.S. Libertarians sound more like anti American progressives.

    1. You know it’s very hard to escape the obvious anti US, anti nation state crap on here, and it does make me a bit disgusted at some times. The USA isn’t perfect, and I’d gladly say “Fuck you USA!” and bail if a genuinely better country sprung up… But as it stands now we’re kind of like the one eyed man in the land of the blind. Everywhere else is soooo much worse, how anybody can be rooting for fucking this country over is just maddening.

      They really are all globalist, anti nation state, anti any kind of traditional culture/values. I’m no trad con, but there’s a difference between being neutral on things and being in favor of freedom of choice for all, versus actively being against something. I’m not for tearing down and pissing on traditional values or nation states just because it’s not cosmopolitan enough for them, whereas they clearly are.

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