I’ve written several times about the foolish War on Drugs, which has been about as misguided and ineffective as the government’s War on Poverty.

So when I saw a news report about a couple of Swedes getting busted for smuggling 200-plus kilos of contraband into Norway, and then another story about a Russian getting caught trying to sneak 90 kilos of an illicit substance into the country, I wondered whether these were reports about cocaine or marijuana. Or perhaps heroin or crystal meth.

Hardly. Norway’s law enforcement community was protecting people from the horrible scourge of illegal butter.

Sounds absurd, but there’s been an increase in the demand for butter and high import taxes have created a huge incentive for black market butter sales. Here’s a video on this latest example of government stupidity.

I guess the moral of the story is that if you outlaw butter, only outlaws will have butter. Or perhaps butter is the gateway drug leading to whole milk consumption, red meat, salt, and other dietary sins. Surely Mayor Bloomberg will want to investigate.

By the way, the United States is not immune from foolish policies that line the pockets of criminals. Here’s a video from the Mackinac Center revealing how punitive tobacco taxes facilitate organized crime.

Big Government Causes Crime, the Norwegian Version is a post from Cato @ Liberty - Cato Institute Blog

The Washington Post ran a story in yesterday’s print edition about the U.S. antidumping order against Wooden Bedroom Furniture from China—a case I described seven years ago as the “Poster Child for [Antidumping] Reform” because its sordid details explode the myths upon which rest the rationalizations for the law’s existence.

Those details are nowhere to be found in the WP article, which was published, presumably, to make a few other points.  One such point—the only one with which I agree—is that antidumping duties aren’t very effective at restoring or preserving U.S. jobs.  As the article demonstrates, since the imposition of AD duties on Chinese furniture beginning in 2005, imports from Vietnam, Indonesia, and other countries not subject to the AD restrictions have emerged to fill the vacuum created by declining imports from China.  Not much news in that, though.  This kind of trade diversion is a typical consequence of antidumping restrictions. Likewise, furniture production and the jobs it used to support has not undergone a renaissance in the United States – despite that being the rallying cry of the domestic producers who brought the case in 2004. (More on that in a moment.)

But the article—beginning with its title (“Chinese Make a Run Around U.S. Tariffs”)—leads readers to the faulty conclusion that those cunning Chinese are at it again, looking for ways to prosper at the expense of innocent, upstanding U.S. producers and their workers.  A pretty good tip-off that an article about China and trade is going to miss the mark, mislead, and misinform is when the author describes trade as a contest between two countries with the trade account characterized as a scoreboard.

The United States and China have exchanged accusations of dumping for years and imposed tit-for-tat duties.  All along, though, China has generally come out on top: Its trade surplus with the United States rose to $273 billion in 2010…more than three times the level of a decade earlier.

Is the reader to conclude, then, that more antidumping measures against Chinese products are integral to reducing the trade deficit and, ultimately, “com[ing] out on top”?  That conclusion doesn’t really dovetail with the point about how antidumping does nothing to restore U.S. production.  But I digress.

The main problem with the article is that it escorts readers to the incorrect conclusion that it was Chinese furniture producers who initiated efforts to get around the U.S. antidumping duties.  Implied throughout the article is that a man named Lawrence Yen, president of a Chinese furniture company, was the architect of some crafty plan to avoid U.S. duties.  It reports that during a meeting of Chinese furniture makers in Dongguan: “[Yen] told them [he] would set up a factory in Vietnam,” which was presented in the article as though it were the idea’s genesis.  The caption to the inset chart of furniture imports in the article reads:

To avoid a 2005 U.S. tariff on Chinese-made wooden bedroom furniture, Chinese furniture companies moved operations to other Asian countries, thwarting U.S. efforts to curb “dumping,” the export of goods at unfairly low prices.

This presentation of events may serve the clichéd theme that Americans are in a pitched battle with the Chinese, who are willing to stretch and break the rules to “win,” but it fails to give readers critical parts of the story.  The fact is that this strategic tariff aversion plan, which is as legal and common as off-the-shelf tax minimization software at Best Buy, was the brainchild of the U.S. domestic furniture industry before it filed the case in 2004.

Here’s where my 2004 paper would be useful to readers interested in a fuller accounting of the details:

The case of Wooden Bedroom Furniture from China has nothing to do with unfair trade and is a perfect example of the need for antidumping reform. The filing of this case was a tactical maneuver by one group of domestic producers that seeks to exploit the gaping loopholes of the antidumping law to get a leg up on its domestic competition. Domestic producers realize that the only way to compete and offer their customers variety is to source at least some production from abroad. Instead of preserving or returning domestic jobs (which is the public justification for the petition) import restrictions will cause a shift in sourcing from China to places like the Philippines, Indonesia, Brazil, and Vietnam–places from which many of the petitioners have begun or are poised to begin importing themselves.

At the time this case was initiated, the same U.S. furniture producers who were petitioning for relief from imports from China were investing in furniture operations in other countries.  There’s nothing illegal or objectionable about investing in foreign production, but the assertions of the petitioning U.S. producers that their aim was to restore U.S. production and U.S. jobs were clearly false.  It is testament to the laughably modest standards for finding a domestic industry injured by reason of dumped imports that duties were ever imposed in the furniture case.  Consider this:

The petitioners’ argument that the U.S. furniture industry is being hurt by Chinese imports is similarly suspect. In the 1990s, U.S. producers began to supplement their domestic production with furniture made in China. The import surge from China did not begin until years after U.S. producers began to cultivate the Chinese industry.

Consider the experience of Vaughan-Bassett Furniture Company, one of the largest U.S. producers and a petitioner in this case. In the late 1990s Vaughan-Bassett invited one of the largest Chinese producers, Lacquer Craft, to its factory to videotape production of bedroom furniture so that it could produce bedroom furniture in China for Vaughan-Bassett to import and resell. According to testimony before the ITC, U.S. producers turned to China to “supplement their product line because they had ideas, they had designs, they were the professionals in our industry, and they knew after traveling to China and seeing the infrastructure there that they could make certain bedrooms in China, bring it here, mark it up 30 to 40 percent to a retailer and still sell it for less than they could have made it for.”

Some producers invested directly in Chinese manufacturing facilities, while others simply imported from unrelated Chinese producers. U.S. retailers soon caught on, recognizing the many benefits of purchasing from China. They could cut out the middlemen (U.S. producers) who were simply importing, marking up, and profiting; they could produce a greater variety of designs (including hand carvings and inlays) that are cost-prohibitive in the United States; they could respond to high levels of defects in U.S. production by switching to alternatives; and they could have custom designs mass-produced and labeled under their own brand names.

While imports of wooden bedroom furniture from China have increased considerably over the past few years, domestic producers (including many of the companies that brought or at least supported the antidumping petition) have played a major role in that increase. In 2000, 6 percent of domestic producers’ U.S. shipments were sourced from China. By 2002, that figure increased to 19.6 percent, and through the first half of 2003, that figure stood at 26.6 percent.

According to the ITC’s own preliminary report in this case:

As an initial matter, we note that the record indicates it has become common practice for members of the domestic industry to import the subject merchandise from China as a means of supplementing their domestic production in the market place. For example, the record shows that 20 of the 40 responding domestic producers imported Chinese merchandise during the period and that the 12 largest domestic producers of wooden bedroom furniture all imported reasonably substantial and increasing volumes of merchandise from China during the period of investigation. In fact, the *** companies within the petitioning group all have imported increasing volumes of subject merchandise from China during the period of investigation.

The essence of this case, then, is well summarized by representatives of Furniture Brands International, Inc., the largest U.S. producer and an opponent of the petition. This case boils down to “a request by domestic producers who are significant importers of the subject merchandise to impose duties on imports that they have voluntarily made on the ground that their very own actions have caused them injury.”

Are petitioners really calling on the federal government to stop them before they import again? The actual story looks more complicated. Evidence presented during the ITC proceeding indicates that certain petitioners have begun or are poised to begin importing from alternate sources should antidumping duties be imposed on Chinese furniture.

The ITC preliminary report confirms this trend is likely underway:

U.S. imports of wooden bedroom furniture from Indonesia, Brazil, Malaysia, and Thailand, the fifth, sixth, eighth, and tenth respective largest foreign country suppliers of wooden bedroom furniture to the United States, increased by a total of $100.4 million during 2000-02 and by another $26.7 million in January-June 2003 from the same period in 2002. Although still a small supplier of wooden bedroom furniture to the U.S. market, U.S. imports of these products from Vietnam increased by a total of $8.5 million during 2000-02 and by another $11.6 million in January-June 2003 from the same period in 2002.

A brief submitted to the ITC by the Furniture Retailers Group indicated that petitioners “have been busy helping to set up operations in numerous third countries, such as Indonesia and Vietnam, where costs are lower than in China. In fact, this week representatives of Vaughan-Bassett are in Vietnam meeting with Vietnamese furniture companies.”

The brief went on to question why the petition named only China and not any of the other low-price third-countries since source-shifting is a common response to country-specific antidumping duties. The answer, of course, was implied.

Although  the antidumping law is hailed by its supporters as a tool to ensure “fair trade” and to “level the playing field” and to protect American firms and workers from “ill-intentioned foreigners,” the fact is that the law is frequently used by U.S. companies seeking advantage over other U.S. companies, with hapless consumers and consuming-industries the collateral damage.

But when media give scant and selective coverage to the topic, they are abetting the status quo, which depends on the continued inscrutibility of the operation of this costly canard.

Antidumping and Bedroom Furniture from China: The Real Story is a post from Cato @ Liberty - Cato Institute Blog

The federal government has been meddling with sugar production since 1934. Today’s convoluted system of supply controls, price supports, and trade restrictions benefits domestic sugar producers at the expense of consumers and utilizing industries. In other words, sugar producers “win” and the rest of the country “loses.”

Sen. Richard Lugar (R-IN) just introduced the “Free Sugar Act of 2011,” which would abolish the federal sugar racket. In a Washington Times op-ed on his bill, Lugar doesn’t pull any punches:

The collapse of communism brought an end to many of the world’s command-and-control economic systems and central planning by government bureaucrats. But a notable exception is the United States government’s sugar program. A complicated system of marketing allotments, price supports, purchase guarantees, quotas and tariffs that only a Soviet apparatchik could love, the U.S. sugar program has actually lasted longer than the Soviet Union itself.

A Cato essay on agricultural regulations and trade barriers elaborates on points Lugar makes in his op-ed:

• The big losers from federal sugar programs are U.S. consumers. The Government Accountability Office estimates that U.S. sugar policies cost American consumers almost $2 billion annually. (Lugar says it could be as much as $4 billion.)
• The GAO found that 42 percent of all sugar subsidies go to just 1 percent of sugar growers. To protect their monopolies, many sugar growers, such as the Fanjul family of Florida, have become influential campaign supporters of many key members of Congress.
• U.S. food industries that buy sugar are harmed by current sugar policies as well. The employment in U.S. sugar growing is 61,000, which compares to employment in U.S. businesses that use sugar of 988,000.  According to a government report, for each sugar growing and harvesting job saved through high U.S. sugar prices, nearly three confectionery manufacturing jobs are lost.
• Numerous U.S. food manufacturers have relocated to Canada where sugar prices are less than half of U.S. prices and to Mexico where prices are two-thirds of U.S. levels.

The federal government engages in a lot activities that are difficult to defend. But when it comes to sugar, the government’s protections are clearly indefensible.

Lugar Targets Federal Sugar Racket is a post from Cato @ Liberty - Cato Institute Blog

Back in February, more than 100 House members introduced a bill that would make it easier to slap duties on imports from China. I explain why picking a trade fight with China would be a bad idea all around in an article just published in the print edition of National Review magazine.

Titled “Deal with the Dragon: Trade with the Chinese is good for us, them, and the world,” the article explains why our burgeoning trade with the Middle Kingdom is benefiting Americans as consumers, especially low- and middle-income families that spend a higher share on the everyday consumer items we import from China.

We also benefit as producers—China is now the no. 3 market for U.S. exports and by far the fastest growing major market. Chinese investment in Treasury bills keeps interest rates down in the face of massive federal borrowing, preventing our own private domestic investment from being crowded out.

The article also argues that, “As the Chinese middle class expands, it becomes not only a bigger market for U.S. goods and services, but also more fertile soil for political and civil freedoms.”

You can read the full article at the link above. Better yet, pick up the April 4 print edition of the magazine, the one with Gov. Rick Perry on the cover. My article begins on p. 20. (It might be a holdover from my newspaper days, but I still get an extra kick out of seeing an article printed in a real publication.)

P.S. For a fuller treatment of our trade relations with China, you can check out my 2009 Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization. China takes center stage in several places in the book, which—did I mention?—was just named a runner-up finalist for the Atlas Foundation’s 22nd Annual Sir Antony Fisher International Memorial Award for the best think-tank book of 2009-10.

Why Trading with China is Good for Us is a post from Cato @ Liberty - Cato Institute Blog

Did America become a great industrial power in the 19th century because of its high trade barriers? This is not just an academic question. Modern-day critics of trade, such as Pat Buchanan and Ian Fletcher, argue that the same tariff wall that made American great more than a century ago can bring back those days of industrial glory.

I did my best to debunk this flawed historical argument in Chapter 7 of Mad about Trade, but I’m delighted to see my free-trade buddy Don Boudreaux of George Mason University weigh in with an article in the new issue of The Freeman.

Under the title, “Tariffs and Freedom,” Don neatly dispels a number of myths surrounding that period in American economic history.

Can a Tariff Wall Restore America’s Industrial Glory? is a post from Cato @ Liberty - Cato Institute Blog

Mary Anastasia O’Grady has an excellent article in today’s Wall Street Journal on the Obama administration’s failure to push the U.S.-Colombia preferential trade agreement.  She rightly points out that the terms of the agreement should be especially favorable to mercantalists, since the agreement would see no reductions in the tariffs the United States places on Colombian goods — most of which already enter duty-free under the terms of the Andean Trade Preference Act — but will oblige Colombia to open its markets to those U.S. exports the administration is always banging on about.

More on the Colombia FTA from Cato analysts here and here.

O’Grady on the US-Colombia FTA is a post from Cato @ Liberty - Cato Institute Blog

Republican leaders in Congress announced Monday that they are all on board to ban spending “earmarks” when the newly elected Congress convenes in January. That is all to the good. While not a large share of the federal budget, the designation of tax dollars to fund specific pet projects in member districts has come to symbolize out-of-control spending in Washington.

Those same leaders should clarify that the earmark ban applies only to spending projects—not to the kind of tariff suspensions including in a recent miscellaneous tariff bill.

The U.S. Manufacturing Enhancement Act approved by Congress in July suspended tariffs on hundreds of imported items of special interest to U.S. manufacturers. House Republican leaders made the mistake earlier this year of including such tariff suspensions in an earmark ban they announced in March.

The overly broad definition of an earmark boxed the leadership into opposing a perfectly sensible trade bill. Despite the half-hearted opposition of the GOP leadership, the U.S. Manufacturing Enhancement Act passed overwhelmingly in the House on July 21, by a margin of 378-43, with Republicans supporting it by a 3-1 margin.

Most members of Congress already understood what the Cato Institute pointed out in a September 2010 study recommending reform of future miscellaneous tariff bills—that tariff cuts are not the same as spending earmarks. Here is what I wrote in the study about the difference between tariff cuts and the kind of spending earmarks that has angered voters:

Spending-bill earmarks distribute tax dollars not for any public purpose authorized under the U.S. Constitution, but rather to benefit a certain special interest or a specific city or district. They grant favors to a small group of beneficiaries at the public’s expense. In contrast, a tariff suspension repeals a narrow tax that falls disproportionately and unfairly on a small group of producers. Instead of granting a favor at the public’s expense, a tariff suspension relieves individual producers of a burden that falls on them and nobody else. Unlike a spending earmark, a tariff suspension creates no new claim on public resources. It does not expand the scope or size of government.

Including tariff suspensions in the moratorium is not a matter of curbing the power of lobbyists. There is a world of difference between lobbying for a $500,000 government grant for a project with narrow benefits, and lobbying to remove a $500,000 tax bill that only a handful of enterprises are required to pay. The former seeks an expansion of the government’s power and influence, the latter a reduction. Republicans who rightly complain about the growth of the federal government should be the first to embrace the suspension and repeal of hundreds of nuisance taxes distorting the economy and burdening American producers.

The new Congress may soon consider another miscellaneous tariff bill to further reduce discriminatory tariffs that impose real costs on U.S. companies trying to compete in global markets. Republican leaders should join with their Democratic counterparts in the new Congress to clarify that suspending or repealing unfair tariffs should not be banned but should be vigorously pursued.

Ban Spending Earmarks, But Not Tariff Cuts is a post from Cato @ Liberty - Cato Institute Blog

I have a new paper out today on the Generalized System of Preferences, the program by which the U.S. government allows certain imports from most developing countries to enter the U.S. market duty-free. The program has benefits: some producers in some poor countries are able to sell more than they otherwise would in the U.S. market, and U.S. consumers benefit to the tune  of hundreds of millions of dollars a year because of the tariff exemptions.

But the GSP still represents managed trade, and poorly managed at that. The program is designed so certain goods in which poorer countries tend to have a comparative advantage — textiles, for example — are excluded from the program, mainly because of the influence of the U.S. textile lobby. There are limits on how much of a particular product a beneficiary country can export duty-free, which means that truly efficient and competitve exporters are shut out.  The very existence of the program has proved a stumbling block to (superior, if not first-best) multilateral trade liberalization, because GSP beneficiary countries don’t want reductions in general tariffs to erode their preferential access.

With the GSP expiring at the end of the year (more here on possible vehicles for its passage [$]), it is a good time for Congress to consider radically changing this program. The best way to secure an open, prosperous world economy is to allow trade to flow freely across borders. If that is a bridge too far for politicians, they should at least consider some of the other reforms I suggest to make the GSP more open to more products, and to reduce the interference these programs impose on voluntary, peaceful exchange. Opening the U.S. market on a permanent and non-discriminatory basis should be the ultimate goal.

New Paper on the Generalized System of Preferences is a post from Cato @ Liberty - Cato Institute Blog

Candidates from both parties are trying to win votes this fall by criticizing free trade and trade agreements. As John Steele Gordon points out in a wonderful historical essay, “The Great Mistake,” in the latest Barron’s Weekly:

We’ve been down this unfortunate road before. Recall the Smoot-Hawley tariff, named after its chief congressional sponsors, Sen. Reed Smoot of Utah and Rep. Willis Hawley of Oregon, both Republicans and both chairmen of the committees in charge of taxes.

Introduced in 1929 as the country was tipping into recession, their bill did not have a happy ending. It imposed steep tariff increases on agricultural as well as manufactured goods, raising overall U.S. tariffs to their highest levels in decades. When President Hoover reluctantly signed the bill in June 1930:

The stock market, once again a leading indicator, immediately turned south. It wouldn’t stop falling for two years—the Dow Jones Industrial Average gave up all its gains since its inception in 1896.

Other countries made good on their threats of retaliatory tariffs, and world trade collapsed. American exports had been $5.24 billion in 1929. Three years later U.S. exports were worth only $1.16 billion, a 78% decline. The Smoot-Hawley tariff would prove to be one of the major government mistakes that converted an ordinary recession into the calamity of the Great Depression.

The protectionist bill was bad politics as well as bad economics. Hoover, Hawley, and Smoot were all swept out of office in 1932.

A History Lesson for Trade Bashers is a post from Cato @ Liberty - Cato Institute Blog

My colleague Dan Griswold pointed out yesterday some unfortunate editing in the Washington Post. Here are a couple of other trade-related items in the news recently:

More Trade News is a post from Cato @ Liberty - Cato Institute Blog

The dirty secret of the U.S. tariff code is that it is not only insanely complex but that it is biased against the poor. Our highest remaining trade barriers are imposed on goods that loom the largest in the budgets of poor and middle-income families — such as food, shoes, and clothing.

Politicians and interest groups that fight any reduction of U.S. tariffs are unwittingly picking the pockets of the poor every day. I discuss how President Obama supports this unfair status quo in a new Cato podcast, in an earlier newspaper column, and in Chapter 9 of Mad about Trade.

And you can bet your imported t-shirt that I will highlight this inconvenient truth during my presentation at today’s Cato book forum. You can watch it live online beginning at noon, eastern time. Commenting on Mad about Trade will be Steven Pearlstein, business columnist for the Washington Post.

Cato Podcast Exposes Anti-Poor Bias of U.S. Tariffs is a post from Cato @ Liberty - Cato Institute Blog

In the latest example of “We had to burn the village to save it” logic, Sen. Sherrod Brown (D-OH) argues in a letter in the Washington Post this morning that the way to “support more trade” in the future is to raise barriers to trade today.

Brown criticizes Post columnist George Will for criticizing President Obama for imposing new tariffs on imported tires from China. Like President Obama himself, Brown claims that by invoking the Section 421 safeguard, the president was merely “enforcing” the trade laws that China agreed to but has failed to follow. He scolds advocates of trade for talking about the “rule of law” but failing to enforce it when it comes to trade agreements. Brown concludes, “If America is ever to support more trade, its people need to know that the rules will be enforced. And Mr. Obama did exactly that.”

Nothing in U.S. trade law required President Obama to impose tariffs on imported Chinese tires. As my colleague Dan Ikenson explained in a recent Free Trade Bulletin, Section 421 allows private parties to petition the U.S. government for protection if rising imports from China have caused or just threaten to cause “market disruption” to domestic producers. If the U.S. International Trade Commission recommends tariff relief, the president can decide to impose tariffs, or not.

The law allows the president to refrain from imposing tariffs if he finds they are “not in the national economic interest of the United States or … would cause serious harm to the national security of the United States.”

As I argue at length in my new Cato book Mad about Trade, trade barriers invariably damage our national economic interests and weaken our national security, and the tire tariffs are no exception. If the president had followed the letter and spirit of the law, he would have rejected the tariff.

And since when is causing “market disruption” something to be punished by law? Isn’t that what capitalism and market competition are all about? New competitors and new products are constantly disrupting markets, to the discomfort of entrenched producers but to the great benefit of the general public and the economy as a whole.

Human beings once widely practiced an economic system that minimized market disruption. It was called feudalism.

C/P Mad About Trade

Curbing Free Trade to Save It is a post from Cato @ Liberty - Cato Institute Blog

Anyone still inclined to minimize the meaning of President Obama’s Chinese tire tariff decision should read George Will’s column today.

It is not only the direct costs of this particular decision, which are numerous and tallied in the article (and in this paper), that should concern us. Will’s bigger concern is the foreshadowing of more protectionism from a president who has proven to have no qualms about looking straight into other people’s eyes and claiming that his administration opposes protectionism, favors free trade, and is working to advance pending trade agreements through Congress, all while remaining “invertebrate as he invariably is when organized labor barks.”

Is this a sign of schizophrenia? No, it’s worse. What we have here is a president who views trade policy as nothing more than a tool to advance his own political standing with groups that are hostile to commerce. Since groups on the left have grown disenchanted that some of the most socialist elements of the health care debate might be left on the cutting room floor, why not try to placate them with anti-business, anti-consumer, anti-globalization protectionism? Will makes the link between tire tariffs and the health care debate in his concluding sentence.

A president who fancies himself economically enlightened and internationalist would treat trade policy as a means to promoting economic growth and sound foreign relations. This president, regrettably, views trade policy as a sacrificial pawn in the service of politics as usual.

The Tire Tariff and the Invertebrate President: A Fable is a post from Cato @ Liberty - Cato Institute Blog

President Obama promised to change the way things are done in Washington, but his administration has mastered one old Washington trick: releasing bad news late on Friday, or even on Saturday night of a long weekend, in the hope that journalists won’t have much chance to ask questions or get into the next day’s papers. Consider:

• The nation would be forced to borrow more than $9 trillion over the next decade under President Obama’s policies, the White House acknowledged late Friday.
  —Washington Post, Saturday, August 22
• White House environmental adviser Van Jones resigned late Saturday after weeks of pressure from the right over his past activism. “On the eve of historic fights for health care and clean energy, opponents of reform have mounted a vicious smear campaign against me,” Jones, special adviser for green jobs at the White House Council on Environmental Quality, said in a statement announcing his resignation just after midnight Saturday.
  —Washington Post, Sunday, September 6, 2009
• The White House late Friday announced it would impose high tariffs on imports of Chinese tires in a case seen as the first test of trade policy under President Barack Obama… The announcement was made in a release sent out by the White House press office at about 9:30 p.m. Friday night, a time when news is sometimes “dumped” in the hope it will attract less attention.
  —TheHill.com, 10:56 p.m., Friday, September 11, 2009

So what will it be tonight? A late-night tax increase? The resignation of another administration appointee who didn’t pay his own taxes? More troops for Iraq?

It’s Friday — What Bad News Will Be Released Late Tonight? is a post from Cato @ Liberty - Cato Institute Blog

In defending its tire tariff decision, the White House has glommed on to the “logic” that free trade first requires enforcement of trade agreements.  Scott Lincicome exposes the absurdity of that defense here. But with that fallacy serving to undergird what sounds like a pre-justification for more trade cases and more trade restrictions, let me remind the reader that we already have 299 active antidumping and countervailing duty measures in the United States, resticting or prohibiting imports from 43 different countries.  We have all sorts of restrictions on imported textiles, clothing, footwear, food products, agricultural commodities, lumber, steel, pickup trucks, tobacco, and many, many more products, including tires.  But despite all of this enforcement–of rules that are hard to justify, as they penalize most members of society for the benefit of a connected few–we still don’t have free trade in the United States.  In other words, we’ve had the enforcement, where’s the free trade?

And if the holier-than-thou U.S. government is going to focus on enforcement of rules, then by all means do unto others.  The United States remains baldly and defiantly in violation of its NAFTA commitments to open U.S. roads to Mexican trucks by the year 2000.  The United States remains defiantly in protest of WTO Dispute Settlement Body decisions impugning U.S. cotton subsidies, U.S. prohibitions on gambling services offered by providers in Antigua, the antidumping calculation methodology known as “zeroing,” and the Byrd Amendment.  Trade partners in some of these cases are either retaliating or have been authorized to do so.

The argument that more rigid enforcement leads to freer trade will be tested.  But don’t let the inevitable slew of new 421 cases and related restictions in the name of enforcement fool you.  After the restrictions, the retaliation, and the adoption of similar measures in other countries, free trade will be right around the corner.  The next corner.  Keep looking…

Return of the Trade Enforcement Canard is a post from Cato @ Liberty - Cato Institute Blog

President Obama’s decision to impose a 35 percent tariff on imported tires from China was not an act of statesmanship. The White House admitted as much by announcing its decision at 10 p.m. on Friday evening in order to minimize news coverage.

A few union leaders are cheering, but in just about every other way our country is worse off. Among the biggest losers will be low-income American families. The tariffs apply to lower-end tires that sell for $50 or $60 each, compared to $200 for higher-end tires. As The Wall Street Journal reported this morning:

The low end of the market will feel the impact of the tariff most, as U.S. manufacturers, who joined the Chinese in opposing the tariffs, have said it isn’t profitable to produce inexpensive tires in domestic plants.

“I think within the next 60 days you’ll see some pretty significant price increases,” said Jim Mayfield, president of Del-Nat Tire Corp. of Memphis, Tenn., a large importer and distributor of Chinese tires. He estimates prices for “entry-level” tires could increase 20% to 30%.

The anti-poor bias of U.S. tariffs is one of the themes of my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization.  With his decision Friday, President Obama has revealed himself to be a friend of the status quo.

Obama’s Tire Tariff Could Raise Prices by 20 to 30 Percent is a post from Cato @ Liberty - Cato Institute Blog

From the quiet shadows of the White House, at around 10 pm on Friday night, came word that President Obama will impose prohibitive duties of 35% on imports of Chinese tires.

Well, we at Cato and elsewhere have warned repeatedly of the dangerous consequences of this outcome (June 18, July 24, August 13, September 9, September 11). Former Cato colleague and coauthor Scott Lincicome has an excellent analysis on the ramifications right here.

The good news is that we now have clarity about where the president stands on trade. The bad news is that his stance reflects his isolationist primary election campaign rhetoric and not the post-election messages of avoiding protectionism and repairing the damage done to America’s international credibility by unilateralist Bush administration policies. Short of armed hostilities or political subversion, no state action is more provocative than banning another’s products from entering your market. I guess this paper was too audaciously hopeful. We’re chastened.

Technically, the Chinese are not legally entitled to retaliate because the United States has legal recourse to restrictions under this so-called “China safeguard” law until 2013. But plenty of American exporting interests have been worried enough to write numerous letters to Obama urging restraint–but to no avail.

Restrictions have never been imposed under this law because in all previous cases — all during the previous administration — President Bush exercised his discretion to reject the recommended duties because of the likely cost of those restrictions on the broader economy. Thus, the Chinese know the decision is a matter of presidential discretion, unlike the antidumping and countervailing duty laws, which are on statutory autopilot and don’t require the president’s attention. Accordingly, the tire restrictions are the edict of the American president, and thus carries more profound meaning for the Chinese.

One of the more thrilling spectacles in all of this, if politicians were capable of humility, would be watching President Obama explain his decision to impose tire duties on China at the G-20 meeting he is hosting in Pittsburgh in 12 days. Recall the president’s pledge (along with the other G-20 leaders) at the last G-20 meeting in London to avoid new protectionist measures.

American credibility on trade is spent. And maybe Obama will find comfort in that fact because he won’t be burdened with that historic responsibility, as he signs off on the slew of new requests for trade restrictions (which are undoubtedly coming soon) under this law from other U.S. industries seeking handouts.

Strap on your armor; the die has been cast.

Obama to Impose Tariff on Chinese Tires is a post from Cato @ Liberty - Cato Institute Blog