What Ever Happened To Tariffs?

[Conan71]

Something my boss and I were talking about related to the failures of three solar businesses in the last month.  Stiff competition from China on solar panels and cells is a large issue cited.  There's a lot of hope for job growth hanging on green energy but in order for green energy to be sustainable, it requires government subsidy.  Most businesses are looking for some sort of subsidy, whether it's tax breaks, direct payments, or being able to contract for a large amount of business with the government.  So many companies have to compete with Chinese manufacturers and can't do it on an equal footing without subsidies or working with smaller payrolls.  It's another reason many U.S.-based corporations have resorted to establishing their own manufacturing divisions overseas.

Why is it we never hear of tariffs any more?  They were designed as a means to help protect U.S. business and keep foreign competitors from dumping cheap goods on our doorstep.  Have be become so afraid to piss off foreign governments that it's costing millions of Americans jobs?

Wouldn't charging tariffs in place of awarding huge subsidies or tax breaks help close the deficit and help pay down our debt?  Wouldn't tariffs help protect American jobs and create a better demand for U.S. made goods since pricing could be equalized?

Discuss.

[Teatownclown]

Agreed.

predictable.... "don't tax me, tax that Chinaman behind the tree" ?

[TheArtist]

  Yea lets make our solar panels (or "widgets" in general) cost more than our competitors in Canada, Europe, Brazil, etc. will be buying them for, that way they can live more cheaply, run their businesses more cheaply, buy cheaper products to produce goods with and then they can outsell us here.  The world is so interconnected and goods flow so freely today that its difficult to tariff things like you used to.  As a for instance.  If I can't buy cheap canvas and brushes from China, my artist competitor in France will and he will sell his paintings here for less than I can.  

Now what I would really like to see is better patent and creative copyright control.  You work hard to create something original or better and get it out on the market, then suddenly its everywhere "made in China".  My parents work craft and wholesale shows and the like where your supposed to have original works of art.  They tell me how they will see Chinese people going through those shows, taking photos, buying things, then not long after that knock offs are in every Hallmark, Wall-Mart, Hobby Lobby, etc. around. You can barely keep ahead or create something unique that you can sell for even one season before the cheap, knock offs will appear everywhere.

Just the other day I bought a beautiful, large, silvered leaf design that sits on a table as a work of art from Miss Jacksons.  Had the artists bio, info about his studio, and everything with it.   Wasn't much later that I was walking through Mathis Bros and saw that same exact leaf design, made of plastic, and faked silver, stuck on a plaque, and made in China.  

No matter what you create and put out there, they steal it and put it out there as their own. And its amazing how quickly they can do it too.

On the one hand, ok so I can't make a living doing classical style paintings like you could have 25-30 years ago, for everyone can buy the old world knockoffs that are made in China.  I get that, so moving on and doing something different. But as soon as I create something different, a different artistic look or type of painting, I don't need it copied and sold out there the very next season for less than half of what I can even make it for lol.  Same with clothes designs and fashion.  Used to be a company could create something unique, a "new style" and they could sell it for a decent price for it would be a while before it trickled down to the masses and was "everywhere".  Remember when the "baroque/ornate" patterns came out on shirts and the like in the nicer stores?  Wasn't any time at all before they were sold in Eeeevery store from Wally World on up.  May not be important to you, but if your a creative person and you work your arse off to create something new, at least give me one full season to make some money on it before you rip my idea off lol.  New fashions and designs have always come and gone, but its the speed with which your new idea is copied that makes it difficult to compete and make money off of.  And then too, fashions don't "go" like they used to anymore.  I can go to Ross or wherever and find decorative items of every style imaginable, all at the same time.  From country, to 50s mod, to classical, to contemporary, and so on,,, and it wasn't always that way.  It makes it difficult for a smaller store or creative person to "find a niche". There is no niche, there is nothing new that you can keep for long.  Great for the average buyer, but really sucky for the creative person trying to make a living.      

[Conan71]

That's the point, Artist.  Protecting copyrights and trademarks is difficult.  Unless it's a notable product like an iPhone or well-used software program, you can't get any protection from the government.  Can you imagine an artist like yourself trying to convince the federal gov't to go after some company in China copying your original designs for the Art Deco museum?  Taxing containers of imported goods before they leave a U.S. port to go in-land is far easier to do.  Raise the cost of entry into our market high enough and you remove any competitive advantage of people stealing our intellectual, artistic, and mechanical property.

All the time on eBay, I see top name cycling gear for at least 1/2 off what I can buy it in the states for.  I know the gear is counterfeit, violates trademarks, and wouldn't last three rides so I don't buy it.  There's no value in it.  Let's say a pair of primo bike shorts made in Colorado by Pearl Izumi costs $150.  Someone in China does a credible copy of their work with inferior material and tries to sell it in the U.S. for $75.  Put a $75 tariff on it and people would buy the certified American-made product 99% of the time.  Make the Chinese company clearly identify the product and prove whether or not they are a bona fide licensee of the U.S. company or their contractor, or their own company.  Put the burden of proof (ergo the cost) on the importer.  You do one or two things there: either you protect your American corporation and their copyright via a tax which would help put more money in our coffers and quell trade imbalances (a metric we rarely hear trotted out in the media anymore.  I guess that's sooo 1985 now.) or you erect a barrier to trade which discourages theft of American innovation and creativity.

As well, raising tariffs would make it costlier for U.S. companies to have manufacturing plants overseas.  By the time they cover shipping and tariffs, they are better off to make the goods here.  So what if other countries erect tariff walls of their own?  They still demand U.S. quality goods.  

Call me xenophobic, but we've done nothing to stanch the flow of jobs out of the country.  American consumers and business' first priority seems to be cost over value and that has cost millions of manufacturing jobs in the last 30 years.  So what if a lot of manufacturing is on the low end of the pay totem pole, it's productivity and it beats an unemployment check hands-down.

[nathanm]

The quick answer to your question: free trade treaties. That's why we don't do it any more. This is rooted in the Chicago-school view that free trade is and always will be a net good, no matter what the surrounding circumstances. I actually am in general agreement with the principle, but I think we implement it poorly. Clearly if China has few to no enforced environmental regulations and we do have a regime in place to stop pollution, it will be cheaper to build a factory in China. Same with labor laws. If we have them and China doesn't, we're again at a significant disadvantage.

Obviously, most of us here in the US agree that some environmental regulation is necessary so that we don't kill ourselves off with noxious effluent and that it shouldn't be legal to pay your employees ten cents an hour. Yet that's precisely what many companies do when they offshore work to China and elsewhere or when local Chinese companies build products to sell in the US. So it may be free trade by definition, but the game is presently severely rigged to favor offshore production. Free trade is only really free if there's a level playing field.

IMO, a better scheme would be to enact tariffs that raise the cost of goods produced with near-slave labor or lax environmental controls to (approximately) what they would have cost had the manufacturing operation complied with US environmental and labor laws. The key would be to evaluate the relevant regulations in each individual exporting nation to avoid penalizing German (to pick one example) goods and to have a clear waiver process whereby if a company manufacturing goods in China (again, to pick one example) can show that they are meeting the US' standard for minimum wage (probably best to calculate with PPP, not just convert whatever to Dollars) and cleanliness their particular goods do not have the tariff applied.

The problem is that I don't know how workable that would be in the real world. The answer to low standards elsewhere isn't to lower our own, IMO.

Edited to add: I should note that free trade treaties also have downsides for the poorer country, in that the means of production becomes largely (and sometimes even mostly) owned by foreign interests.

[dbacks fan]

Here is an interesting chart and info on tariffs in the US and some info to go along with it. (It's from wiki)

http://en.wikipedia.org/wiki/Tariff

[Conan71]

Nathan, probably one of the few times I'll agree with you on economics, but I pretty much agree with your whole post.

Interesting to note on DBacks post that tariffs as a percent of total treasury revenue remains roughly the same over the last five or six decades, though the % charged on goods has dropped.

Free trade, though touted as a boon for American business, seems to have screwed American workers.  Anyone have a fix on what the unemployment rate is in, say, China?

[Gaspar]

Nathan, probably one of the few times I'll agree with you on economics, but I pretty much agree with your whole post.

Interesting to note on DBacks post that tariffs as a percent of total treasury revenue remains roughly the same over the last five or six decades, though the % charged on goods has dropped.

Free trade, though touted as a boon for American business, seems to have screwed American workers.  Anyone have a fix on what the unemployment rate is in, say, China?

It's around 4% but they calculate it very differently.  They also have some interesting tenure laws, and the local jurisdictions set minimum wage limits.  During times of recession in different regions they drastically drop minimum wage, allowing companies to hire a cheaper workforce.  Current employee wages are also frequently adjusted to meet economic conditions.  If you are tenured at a company, you have a protected job, but your wages may drastically decrease to meet economic need. 

Hourly pay at a company and minimum wage rates can literally change by the hour.  The only rules is that they must be higher than the "social relief" amounts for that region.  China's social relief is basically enough to pay for a modest amount of food.

Some jurisdictions have weekly rate fixing some have monthly, and some have hourly.  This keeps unemployment very low.

[DTowner]

Because China, like the US, is a member of the World Trade Organization ("WTO"), we cannot simply impose tarriff's on Chinese imports without getting hauled before the WTO and sanctioned.  Setting aside the very real differences in costs of production issues, a significant cause of much of our foreign trade imbalance is due to non-tarriff barriers that limit the US' ability to export high value added goods to countries like China.  For example, China uses non-tarriff barriers, such as artificial currency manipulation and state-owned enterprises to control imports, to make it expensive and/or difficult to sell US made goods in China.  Unfortunately, the WTO has not been very effective in addressing these issues and it's not like the US has totally clean hands on these types of matters.

[Gaspar]

Conan, I do not agree...
Trade barriers such as Tariffs signal a natural inability to compete.  When a company can no longer compete on quality, and innovation, it may resort to price alone.  When a company can no longer compete on price alone, it is time for that company or industry to innovate.  When you erect trade barriers, either internal or across borders (quotas and tariffs), you essentially protect inferior business models through artificial means.  You insulate companies from innovation and slow natural market processes.  You also force consumers to purchase products for a higher price than the market should bear.  Over time this always becomes a political game because a significant amount of corporate profits can be devoted to lobbying efforts to strengthen trade barriers.

If I build a $200 bicycle helmet that meets all of the US safety standards for a bicycle helmet, and my process, production, and materials only cost me $30 a helmet, I have a healthy profit.  If a Chinese company can make and sell the same helmet that meets the same US standards for $60, that means that my price structure is simply not fair to the consumer.   To survive I must bring my price down to a competitive level or bring my quality up to meet my price.  If I can convince the consumer that the $200 investment in my product is worth the difference in quality, I can compete.

Tariffs, quotas and other import restrictions protect the business of the rich at the expense of high cost of living for the poor. Their intent is to deprive you of the right to choose, and to force you to buy the high-priced inferior products of politically favored companies. – Alan Burris

Manufacturing and commercial monopolies owe their origin not to a tendency imminent in a capitalist economy but to governmental interventionist policy directed against free trade and laissez faire. – Ludwig Mises

[Conan71]

Conan, I do not agree...
Trade barriers such as Tariffs signal a natural inability to compete.  When a company can no longer compete on quality, and innovation, it may resort to price alone.  When a company can no longer compete on price alone, it is time for that company or industry to innovate.  When you erect trade barriers, either internal or across borders (quotas and tariffs), you essentially protect inferior business models through artificial means.  You insulate companies from innovation and slow natural market processes.  You also force consumers to purchase products for a higher price than the market should bear.  Over time this always becomes a political game because a significant amount of corporate profits can be devoted to lobbying efforts to strengthen trade barriers.

If I build a $200 bicycle helmet that meets all of the US safety standards for a bicycle helmet, and my process, production, and materials only cost me $30 a helmet, I have a healthy profit.  If a Chinese company can make and sell the same helmet that meets the same US standards for $60, that means that my price structure is simply not fair to the consumer.   To survive I must bring my price down to a competitive level or bring my quality up to meet my price.  If I can convince the consumer that the $200 investment in my product is worth the difference in quality, I can compete.

Tariffs, quotas and other import restrictions protect the business of the rich at the expense of high cost of living for the poor. Their intent is to deprive you of the right to choose, and to force you to buy the high-priced inferior products of politically favored companies. – Alan Burris

Manufacturing and commercial monopolies owe their origin not to a tendency imminent in a capitalist economy but to governmental interventionist policy directed against free trade and laissez faire. – Ludwig Mises

I'd been hoping you'd take the time to add a thoughtful reply.  I'm usually against government interference in commerce, but since we can't seem  to gain traction on jobs and it's obvious there's a lot more manufacturing tasks being exported to China due to cheap labor and raw materials, I only see more manufacturing headed off-shore.  Harley-Davidson actually requested tariffs be removed from their competitors in the mid-1980's as they had gotten ahold of the problems in their manufacturing process which had almost tanked them and made them so uncompetitive in price and quality.

Your example works when there's a level playing field.  With China, there is not one.  It's not even just consumer goods they are gaining an edge on.  Two U.S. boiler companies have located manufacturing plants there in the last six years with the goods produced being shipped back to the U.S. market.  That was once a heavily-union run industry.  The real shocker to me was when I found out that open wheel race car frames are even being built there.  Bicycle carbon fiber technology?  All China baby.  There's even a lot of European brands who shuttered their Euro facilities and simply contract with one of three major carbon fiber bike frame plants.

It used to be goods coming from China and/or Taiwan were cheaper because the were inferior. They attempted to copy better technology in their manufacturing processes in those days.  Now the goods are on par with what you could make here because we gladly ship our technology overseas.

Let's say that due to other government restrictions like environmental, OSHA, and import/export compliance (as well as the cost of employing additional staff to maintain the records required for meeting those regs), minimum wage, making sure I'm employing legal citizens or guest workers, and a mandate I provide healthcare for my employees, wait let's not forget payroll taxes- it costs me $60 to produce that helmet.  In other words, it's got nothing to do with my inefficiency as a business owner, lack of demand for my product, or a poor design, it's got to do with a government which created an uncompetitive environment for me to compete.  At that point, shouldn't the government want to help protect the jobs of those people I employ?

Hell, I'd rather just contract with a company in China to build my helmet designs for $30 a copy, hire a few contract merchandisers, buy a place in the Caymans and watch the Benjamins roll in.

[Gaspar]

I'd been hoping you'd take the time to add a thoughtful reply.  I'm usually against government interference in commerce, but since we can't seem  to gain traction on jobs and it's obvious there's a lot more manufacturing tasks being exported to China due to cheap labor and raw materials, I only see more manufacturing headed off-shore.  Harley-Davidson actually requested tariffs be removed from their competitors in the mid-1980's as they had gotten ahold of the problems in their manufacturing process which had almost tanked them and made them so uncompetitive in price and quality.

Your example works when there's a level playing field.  With China, there is not one.  It's not even just consumer goods they are gaining an edge on.  Two U.S. boiler companies have located manufacturing plants there in the last six years with the goods produced being shipped back to the U.S. market.  That was once a heavily-union run industry.  The real shocker to me was when I found out that open wheel race car frames are even being built there.  Bicycle carbon fiber technology?  All China baby.  There's even a lot of European brands who shuttered their Euro facilities and simply contract with one of three major carbon fiber bike frame plants.

It used to be goods coming from China and/or Taiwan were cheaper because the were inferior. They attempted to copy better technology in their manufacturing processes in those days.  Now the goods are on par with what you could make here because we gladly ship our technology overseas.

Let's say that due to other government restrictions like environmental, OSHA, and import/export compliance (as well as the cost of employing additional staff to maintain the records required for meeting those regs), minimum wage, making sure I'm employing legal citizens or guest workers, and a mandate I provide healthcare for my employees, wait let's not forget payroll taxes- it costs me $60 to produce that helmet.  In other words, it's got nothing to do with my inefficiency as a business owner, lack of demand for my product, or a poor design, it's got to do with a government which created an uncompetitive environment for me to compete.  At that point, shouldn't the government want to help protect the jobs of those people I employ?

Hell, I'd rather just contract with a company in China to build my helmet designs for $30 a copy, hire a few contract merchandisers, buy a place in the Caymans and watch the Benjamins roll in.

We are attempting to make a correction for the trespasses in one area of the market by trespassing in another.  We have domestic policies that are, and will continue to make it difficult for us to compete internationally, so our answer is to erect more obstacles to competitiveness by shutting out foreign competition. The result is that we get more expensive products, and those producers can relax on quality because they don't have to face the natural competition.

As our government policies push more production over US borders, there will be a natural tendency to erect walls against trade.  This, like all artificial market manipulation, will come out of the pockets of the consumer. 

A side effect is the creation of a healthy black-market and more prisons to house the offenders.

Libertarians believe the answer to America's political problems is the same commitment to freedom that earned America its greatness: a free-market economy and the abundance and prosperity it brings; a dedication to civil liberties and personal freedom that marks this country above all others; and a foreign policy of non-intervention, peace, and free trade as prescribed by America's founders. – The Libertarian Party

[TheArtist]

  I don't think tariffs will work like they used to because the world is so much "flatter".  If you make the Chinese "widgets" cost more for people in the US,,, essentially your letting our competitors in Canada, Brazil, the EU, etc. get their widgets for less and now they have a competitive advantage over us.

A.  Their paying less to live.
B.  They are paying less for items they use to produce other goods (many items are made from parts all over the world).  My supplier in China may be my competitors supplier (canvas, brushes, pencils, etc.) in Europe.  Make my products cost more,,, In comes the products from Canada or Europe that are cheaper because they are able to use cheaper materials.  

Or, say its widows.  A local window manufacturing company here recently went out of business. Say we tariff windows.  Now the US companies are paying more and the EU and Canadian companies are paying less to build an office or manufacturing building.  They now have a competitive advantage for their costs are less.  The individual worker in the EU or Canada also gets a boost for they are paying less for windows in their homes while the US worker is paying more. Does the US company now have to pay the US worker more in order to have the same standard of living as their counterpart elsewhere?  What does that do to that companies worldwide competitive advantage?  Clothing, solar panels to generate electricity, etc.  The things I use to make goods, the things I buy to live. Make them cost more for me and my competitor in another country then has an advantage when they import their cheaper goods here, or when we try to sell our more expensive goods there. Are you going to tariff those other countries goods?  For most things you just can't stop the flow anymore.  It would be like sticking your finger in a dike and watching as 3 more holes start streaming water from somewhere else.    

[nathanm]

We are attempting to make a correction for the trespasses in one area of the market by trespassing in another.  We have domestic policies that are, and will continue to make it difficult for us to compete internationally, so our answer is to erect more obstacles to competitiveness by shutting out foreign competition. The result is that we get more expensive products, and those producers can relax on quality because they don't have to face the natural competition.

So you're saying that the answer is to sink to their level. I don't know about you, but I enjoy having a higher standard of living than the vast majority of Chinese. You talk as if all regulations on business are there because we hate ourselves and want to destroy our country. No, we have (most of) them because a problem was identified that wasn't being solved through normal market forces. We found out that too much Sulfur Dioxide emissions cause acid rain. We found that letting people pay sweat shop wages was a net drain on society as a whole. We had a problem with destitute retirees, so we created Social Security. We have OSHA because of companies that refused to take worker safety seriously. We have Superfund because manufacturing and chemical concerns were dumping their effluent into the environment and refusing to clean it up.

[Red Arrow]

We found out that too much Sulfur Dioxide emissions cause acid rain.

We found out that hastily designed exhaust systems to meet one set of emission requirements (NOx, I believe) on a timetable led to other emissions (Sulphur Dioxide).