April 18, 2013
Ah, the maligned public servant. Whatever polls reveal about his
low popularity, he pursues policies that satisfy the government’s crucial role
as protector of health, safety, and the environment.
William Watson and Sallie
James explain in a new
Cato Institute analysis, “The legitimacy of the modern administrative state
rests upon an inaccurate assumption that regulators will reliably behave like
selfless agents of the public interest. On the contrary, legislators and bureaucrats
respond to personal incentives just like anyone else. Because of this, the
entire regulatory edifice is susceptible to lobbying and even capture by
Protectionism: A Hidden Threat to Free Trade” argues that when “prominent
standard bearers for left-liberal causes” act in concert with “inefficient,
rent-seeking industries,” consumers suffer. Watson and James provide many
examples of the disease they diagnose. One involves cigarettes. In 2009, the “Family
Smoking Prevention and Tobacco Control Act” banned flavored coffin nails.
But the touchy-feely legislation contained a ginormous loophole. Menthols were
exempted, and the World Trade Organization found that the carve-out violated U.S.
free-trade obligations. Why? “One, because [menthols] are popular -- 25 percent
of all cigarettes smoked in the United
are menthols -- especially among African-Americans (80 percent of black smokers
choose menthols). And two, because a ban on flavored nonmenthol cigarettes did
not affect U.S.
cigarette producers, only their foreign competition.”
The WTO’s decision rested on a simple principle. The General
Agreement on Tariffs and Trade, Watson and James note, requires that
“governments’ domestic laws must treat imports the same as goods produced at
home.” When competition from abroad is penalized -- either blatantly or subtly
-- those aggrieved can make their case to the WTO. And as “Regulatory
Protectionism” makes clear, the U.S.
is frequently on the losing end of the trade tribunal’s decisions.
The 2008 “farm bill” imposed country-of-origin
labeling (COOL) on imported meat products. It wasn’t long before the mandate
was brought to the WTO. It was defeated twice. Judges found that COOL treated
“imported livestock and meat from Canada
(the two complainants in the case) less favorably than similar domestically
produced products. According to the Appellate Body report, the burden of maintaining
detailed records, which caused harm to foreign livestock producers by
increasing their costs, was not justified by the goal of informing consumers,
because the information ultimately given … was much less specific than what the
processors were required to keep track of. This disparity sufficiently revealed
the protectionist nature of the law.”
haters, this one’s for you. The pact mandated that the U.S. allow Mexican trucks to head
north by 2000. Well over a decade later, exporters below the border are still
waiting. This time, the protectionist alliance consists of Naderite groups and
the International Brotherhood of Teamsters. Watson and James aver that “trucks
owned by Mexican companies and driven by Mexican nationals are no less safe
then their American counterparts.” (A pilot program conducted during the Bush
administration substantiates the claim.) Fed up, in 2009 Mexico retaliated with what the Houston Chronicle
called “carefully calibrated rotating tariffs on 99 U.S.
imports that effectively priced them out of the Mexican market, costing U.S.
companies thousands of jobs and hundreds of millions of dollars.” In 2011,
after promises from the White House, the tariffs were dropped. One needn’t be a
cynic to expect them to return, if the Teamsters get their way.
The list goes on: Dolphin-safe tuna, cotton subsidies, catfish
inspections. Again and again, the federal government enacts policies that
violate its obligations under free-trade treaties. The winners are easy to
identify. The anti-trade partnership’s value, Watson and James write, “is much
greater for the protection-seeking industry that gets altruistic cover for its
monopolistic schemes than for the progressive do-gooders who have to settle for
the second or third best option in their quest for political success.”
More than two centuries ago, Adam Smith
pithily outlined the fundamental truth that regulatory protectionism assaults:
“Consumption is the sole end and purpose of all production; and the interest of
the producer ought to be attended to, only so far as it may be necessary for
promoting that of the consumer.”
However disruptively, globalization is advancing. Nearly every
economist agrees -- and a stack of studies confirms -- that Americans have
benefitted from the lowering of tariffs. But as “Regulatory Protectionism”
documents, a free-trader’s work is never done. Those who put profits, job
security, union dues, and reelection ahead of economic freedom prevail too
often, and we’re all poorer for their “success.”
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
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