Colin McNickle explains why protectionist policies like “Buy American” are good for politicians but bad for producers and consumers:
Lost in all the rah-rah-sis-boom-bah-ing of President Trump wanting to use American steel only in the Keystone XL, Dakota Access and other U.S. oil pipelines is this fundamental economic fact:
The price of that steel will be higher. In some cases, markedly so. And we all will be made poorer. Not in effect, but actually.
How so?
As Hoover Institution scholar David R. Henderson once explained it:
“Almost all economists say [‘Buy American’ is] nonsense. And the reason is: We should buy things where they’re the cheapest. That frees up more of our resources to buy other things, and other Americans get jobs producing those things.”
The “problem” of other countries selling goods at or below cost (in other words, making part of the value of the good a gift to the purchaser) is only a problem for uneconomic domestic producers … it’s great for consumers of that good:
… as Tori K. Whiting, a trade and economics scholar at the Heritage Foundation, reminded in September:
“In response to alleged unfair trade practices, domestic steel producers are advocating for broad import restraints and immediate action by the U.S. government to protect the domestic industry. …
“The U.S. manufacturing and construction industries rely on domestic and foreign steel to create finished products. Tariffs on steel imports limit choices and increase costs for these industries. Those costs are ultimately borne by American consumers and act as a tax on everyday goods made from steel,” she reminded.
And as fellow Heritage legal scholar Alden Abbott added, “(A)nti-dumping is in fact a form of special interest cronyism that imposes high costs on Americans and thwarts beneficial competition.”
“Buy American” makes for great political rhetoric. But the reality is that most Americans would find their pocketbooks heavily pinched if the practice became pervasive and America’s overall standard of living would fall.
