PrintOctober 20, 2010
The Folly of Obama's Trade War
We always hear about major international trade fights over big items like steel and cotton. Right now there's talk of fights over everything from China's currency to American chicken parts.
Other times we hear more comical concerns, like the claim that China is dumping ironing boards (someone has to look out for the Big Ironing Board lobby, apparently). But we haven't heard as much about the effort to impose protectionist trade barriers on the pulp and paper products we use each day without second thought.
The silence on the issue masks a troubling story. As documented in a new report, Empires of Collusion, a small group of unlikely allies -- industry and unions, green pressure groups and retailers -- has been operating out of a playbook that sees victory as higher prices and fewer choices for consumers.
Here's how it goes: First, domestic unions like the United Steelworkers and producers most of us have never heard of (with names like NewPage, Sappi, and Appleton) team up to petition the government for tariffs to make foreign products more expensive. That's a direct cost to consumers and it's particularly pernicious because it effectively eliminates consumer choice by pricing a great number of suppliers right out of the market.
Should those products still be competitive, groups like Greenpeace makes wild and oftentimes misleading claims about "illegal logging" and threaten the reputation of retailers like Office Depot and Staples, who in response drop products -- decreasing overall supply and allowing the original colluding parties to get an unfair advantage. Some say it's hard to blame the retailers for folding to "greenmail", but it certainly calls into question how hard they're working to give consumers the best deal.
So far, these empires of collusion have had some luck at imposing temporary levies as high as 135 percent.
But that's bad luck for the rest of us consumers, and even worse luck for those in the developing world, who are supposed to be protected by the UN's development campaign. Last week's meeting focused primarily on government-driven solutions, rather than what can be done to unleash the massive power of private enterprise.
That is most unfortunate, for as New York University Professor William Easterly argues, "only trade-fuelled growth can help the world's poor." He has noted both the costs to consumers of American protectionism (we pay double the world's price of sugar) and on the world's poor (one Oxfam study found eliminating US cotton subsidies would improve the welfare of over one million West African households, or 10 million people).
The same dynamic will now be at play in your local Office Depot and Staples. The price you see on paper is higher than it needs to be, but the real cost is borne by the poor of the developing world who need access to trade opportunities far more than they need lectures of activists and machinations of bureaucrats at UN meetings.
Benjamin Franklin said, "No nation was ever ruined by trade." But the opposite could well be true, as we are seeing from paper cuts to drumsticks.
Andrew Langer is president of the Institute for Liberty, which recently launched the Consumers Alliance for Global Prosperity.
