Quotulatiousness

March 23, 2025

Tariffs versus income taxes – pick your poison

Filed under: Economics, Government, USA — Tags: , , , , , — Nicholas @ 11:29

Walter Block on the pros and cons (from the government’s point of view) of income taxes and tariffs:

Every fiber of my economic being cries out against tariffs. If they are so good, why doesn’t each state in the US have one against the products of all of the other 49? That is, Ohio could “protect” its industries against the incursions from Arizona. This is obviously silly. One of the important reasons America is so prosperous is that we have a gigantic, internal, free trade area.

Donald Trump supports them on the ground that the McKinley administration was prosperous, and relied upon tariffs. But this is to commit the post hoc ergo propter hoc logical fallacy: that since A precedes B, A must be the cause of B. No, America did indeed become rich during this epoch, but that was in spite of tariffs, not due to their benign influence. If you are looking for a historical episode to shed light on this matter, the Smoot-Hawley Tariff of 1930 will do far better: it greatly worsened an already bad recession, plunging our economy into a deep depression.

Our President also claims that the US is victimized by a negative balance of trade: we buy more from Canada and other countries than they purchase from us. However, I have a horrid balance of trade with McDonald’s and Wal-Mart. I acquire several hundreds of dollars’ worth of their products every year, and neither has yet seen fit to reciprocate with any of my economic services (hint, hint!). On the other hand, I have a very strong positive balance of trade with my employer, Loyola University New Orleans. They pay me a decent salary; apart from a few lunches in their cafeteria, my expenditures to them fill their coffers to a zero degree. Should anyone worry about this sort of thing? Of course not. Ditto for international trade. If Country A buys more from B than it sells to it, money will flow from the former to the latter, reducing prices in the former and raising them in the latter, until matters balance out.

Everyone realizes the foolishness of tariffs when it comes to absolute advantage. No Canadian objects to the importation of bananas from Costa Rica. Producing this tropical product in the frozen North would be financially prohibitive (gigantic hothouses). Ditto for maple syrup in the country to the south. The only way they could produce this item would be to place maple trees in gigantic refrigerators. Ludicrous and prohibitively expensive.

But when it comes to comparative advantage, all too many people are out to lunch insofar as the teachings of Economics 101 are concerned. They fear that other countries might be more efficient than we are; with free trade, they would produce everything, we, nothing, and we would all starve to death from massive unemployment.

March 18, 2025

QotD: Lester Thurow and the other cheerleaders for “Industrial Policy” in the 1980s

Filed under: Economics, Japan, Politics, Quotations, USA — Tags: , , , — Nicholas @ 01:00

The late Lester Thurow was quite popular in the 1980s and 1990s for his incessant warnings that America was losing at the game of trade with other countries. Most ominous, Thurow (and others) warned, was our failure to compete effectively against the clever Japanese who, unlike us naive and complacent Americans, had the foresight to practice industrial policy, including the use of tariffs targeted skillfully and with precision. Trade, you see, said Thurow (and others) is indeed a contest in which the gains of the “winners” are the losses of the “losers”. Denials of this alleged reality come only from those who are bewitched by free-market ideology or blinded by economic orthodoxy.

And so – advised Thurow (and others) – we Americans really should step up our game by taking many production and consumption decisions out of the hands of short-sighted and selfish entrepreneurs, businesses, investors, and consumers and putting these decisions into the hands of the Potomac-residing wise and genius-filled faithful stewards of Americans’ interest.

Sound familiar? It should. While some of the details from decades ago of the news-making proponents of protectionism and industrial policy differ from the details harped on by today’s proponents of protectionism and industrial policy, the essence of the hostility to free trade and free markets of decades ago is, in most – maybe all – essential respects identical to the hostility that reigns today.

Markets in which prices, profits, and losses guide the decisions of producers and consumers were then – as they are today – asserted to be stupid, akin to a drunk donkey, while government officials (from the correct party, of course) alone have the knowledge, capacity, willpower, and power to allocate resources efficiently and in the national interest.

Nothing much changes but the names. Three or four decades ago protectionism and industrial policy in the name of the national interest was peddled by people with names such as Lester Thurow, Barry Bluestone, and Felix Rohatyn. Today protectionism and industrial policy in the name of the national interest is peddled by people with different names.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2020-03-12.

March 1, 2025

Canada’s “supply management” system – our literal “sacred cow”

Filed under: Cancon, Economics, Food, Government, Media, Politics, USA — Tags: , , , , — Nicholas @ 04:00

In negotiations with the Trump administration to avert the threat of massive tariffs, our political leaders say that “everything” is on the table … except for one teeny-tiny little massive crony capitalist protection racket that we are apparently willing to destroy the entire national economy to preserve:

Unfortunately, Canada’s stubborn intransigence on a significant trade-related issue once again threatens to undermine our position and, with it, the possibility of a deal. I probably don’t have to tell you, but in case you couldn’t guess … yup. It’s the dairy sector.

At this point it should be noted that there are basically two agricultural industries in Canada. One of those industries relies heavily on exports, has thrived under the various free-trade deals Canada has been party to, and is filled with dread at the prospect of U.S. tariffs. Given the obvious significance of the U.S. as an export market for Canadian goods, one doesn’t have to look too far to find all kinds of nervous folks in these industries. For example, nearly $9 billion in agricultural products were exported to the U.S. in 2023 from just Alberta alone. Beef exports represent about a third of that total, and in fact the U.S. and Canada comprise the world’s largest two-way trade in beef and live cattle. There is much at stake here (pardon the terrible pun).

The other agricultural industry in this country, is, of course, the supply managed sector. That’s dairy, as noted above, but also eggs and poultry. The supply managed sectors of the agricultural industry are governed by a system of quotas, price controls, and sky-high tariffs. It’s essentially a legalized cartel system. This sector not only wants nothing to do with free trade, but actually sees free trade as a threat. To them, “tariff” is not a dirty word because they hide behind a shield of tariffs that are far higher than anything Trump has ever threatened or conceived.

Now, it should also be noted that these two sides of the agricultural sector are vastly different in size and importance. Yet, the vocal and irrational demands of the small, sheltered component seem to be the demands that our politicians remain most beholden to. Consider comments made recently by the contenders for the Liberal leadership: during this week’s debate, nearly all of them bent over backwards to declare fealty to supply management, even while expounding upon the existential threat posed by Trump’s tariffs. Even now, it’s clear that our politicians are afraid to pick this fight.

[…]

While that could have been a wake-up call for Canada, we instead went in the other direction. In the aftermath of the U.K. situation, Parliament went ahead and passed Bill C-282, which would enshrine into law the principle that supply management should never be on the table in any trade talks (the bill ended up being bogged down in the Senate and its future is unclear).

It’s naïve in the extreme to think that any trading partner, including and especially the Americans, would simply shrug and say “Well, shoot, that’s too bad. Let’s move onto other issues.” We’re needlessly harming our position even before talks begin.

February 25, 2025

Argentina’s experience of life with high tariffs

Filed under: Americas, Business, Economics, Government, Politics, USA — Tags: , , , , , , — Nicholas @ 05:00

Marcos Falcone explains how Argentina’s unusually high tariff barriers distort ordinary economic activity for Argentines every day:

When Argentines go abroad, they usually go shopping. Many of the products they want cannot be bought at home, ranging from clothes to smartphones and all kinds of home appliances. Because of this, it has become a tradition to return from a trip with one or two extra suitcases filled with smuggled goods. Did you know that it is more expensive to buy an outdated iPhone in Argentina than it is to fly from Buenos Aires to Miami, stay for three days, and get the newest one?

[…]

Tariffs do not just make it difficult to get phones at home — they can make life dangerous as well. Argentina’s most sold car, which is artificially expensive because of protectionist measures, got 0 (zero) stars on one of Latin America’s most renowned safety tests. Cars in Argentina are not only more expensive than elsewhere in the region, but also markedly less safe.

To achieve these terrible results, the only thing Argentina had to do was enact tariffs, and now the US seems to be heading in the same direction. But in the past, protectionism has caused the same damage in the north as it caused in the south. Back in the first Trump administration, protecting the steel-production industry saved some jobs, but eliminated many more. Tariffs have also hurt businesses that rely on imports within the US and can continue to do so in a world of globally integrated supply chains. More generally, the 1933 Buy American Act, which forces the government to pay more for US-made goods, has been proven to be both ineffective and costly.

There is no escaping the negative effects of blocking outside competition. The more barriers a country enacts, the more damage it causes to itself. If we, as individuals, acted in a protectionist way, we should aim to grow our own food, build our own house, or make our own cars. But how does that make any sense? Economist Robert Solow once said, “I have a chronic deficit with my barber, who doesn’t buy a darned thing from me”. He meant it as a joke, but he had a point: What matters is to create wealth, which can be done both by selling and buying from others.

The revival of protectionism in the US is worrisome. To avoid it, Americans should take a look at the enormous destruction of wealth that tariffs have caused in other countries. Despite President Milei’s recent efforts to lift tariffs and take Argentina out of the “prison” in which it exists, the fact that the country shot itself in the foot decades ago has put it in a very delicate economic position. The US should not follow its path.

February 16, 2025

Free-market economist grapples with a new kind of tariff

Filed under: Business, Economics, Government, Politics, USA — Tags: , , , , — Nicholas @ 03:00

With US President Donald Trump seemingly utterly entranced by the possibilities of killing off as much world trade as he can using tariffs, I did not expect to read that renowned libertarian economist David Friedman is not sure about the latest kind of tariffs being proposed:

I have finally encountered a kind of tariff that I am not sure I am against. The idea is to impose the same tariff on another country’s exports that they impose on your exports. A tariff makes the country that imposes it worse off, a fact that neither Trump or most of the media appear to understand — Vance may — but it makes the country it is imposed against worse off as well. Imposing a tariff can be in the interest of the politicians who impose it for public choice reasons, as a way of buying support from a concentrated and well organized interest group such as the auto industry at the expense of a dispersed interest group such as their customers. That is one of the two reasons tariffs exist, the other being that the false theory of trade economics is simpler and easier to understand than the true theory.1

But another country’s tariff barriers against your exports make both your country and its politicians worse off. So if imposing tariffs on their imports results in tariffs being imposed on their exports, it might be in the interest of the politicians as well as the country they rule to lower, even abolish, their tariffs — and free trade, zero tariffs, is my first best tariff policy.

Reciprocal reduction of tariffs is, of course, a routine objective of trade negotiations. What Trump appears to be proposing is to automate the process. That might have some advantages. It would reduce the amount of time and effort spent on trade negotiations. More important, it would make it harder for a government that wanted to keep its tariffs to pretend to its citizens that negotiations for mutual reductions had broken down over details.

It is not obvious what “reciprocal tariffs” means in practice, because tariffs, typically, are on particular goods. China imports oil and exports textiles. If they impose a tariff on American oil there would be no point to the US retaliating by imposing a tariff on Chinese oil — we don’t import Chinese oil.

    Under the Plan, my Administration will work strenuously to counter non-reciprocal trading arrangements with trading partners by determining the equivalent of a reciprocal tariff with respect to each foreign trading partner. (Reciprocal Trade and Tariffs Memo)

It isn’t clear what “the equivalent” means. One possible approach would be to figure how much revenue a country collects from tariffs on American exports and set a uniform tariff on that country’s exports set to bring in the same amount of revenue. That would be simple and would reduce the political support for tariffs, since they could not be targeted to protect specific industries.

For which reason I don’t expect it to happen. The closest version that seems politically plausible is a nonuniform tariff schedule that brings in the equivalent revenue. Unfortunately that would let the administration protect favored industries with tariffs high enough to reduce imports, and revenue, to near zero.

Of course, the target country could, in a true system of reciprocal tariffs, solve the problem by reducing their tariffs to zero.

February 14, 2025

Trump may start paying attention to Canadian cultural protectionist polices next

Filed under: Cancon, Government, Media, Politics, USA — Tags: , , , , , , , — Nicholas @ 03:00

Michael Geist points out just how many Canadian federal policies and programs will likely come under scrutiny by the Trump administration for their blatant protectionism against US cultural products:

My Globe and Mail op-ed argues the need for change is particularly true for Canadian digital and cultural policy. Parliamentary prorogation ended efforts at privacy, cybersecurity and AI reforms and U.S. pressure has thrown the future of a series of mandated payments – digital service taxes, streaming payments and news media contributions – into doubt. But the Trump tariff escalation, which now extends to steel and aluminum as well as the prospect of reviving the original tariff plan in a matter of weeks, signals something far bigger that may ultimately render current Canadian digital and cultural policy unrecognizable.

Our cultural frameworks are largely based on decades-old policies premised on marketplace protections and mandated support payments. This included foreign ownership restrictions in the cultural sector and requirements that broadcasters contribute a portion of their revenues to support Canadian content production.

As we moved from an analog to digital world, the government simply extended those policies to the digital realm. But with Mr. Trump appearing to call out what he views to be Canadian protectionist policies in sensitive sectors such as banking ownership, the cultural and digital sectors may be next.

If so, there are no shortage of long-standing policies that tilt the playing field in favour of Canadians that could spark some uncomfortable conversations.

Why do U.S. companies face ownership restrictions in the telecom and broadcast sectors? Why are Canadian broadcasters permitted to block U.S. television signals in order to capture increased advertising revenue? Why do Canadian content rules exclude U.S. companies from owning productions featuring predominantly Canadian talent?

The Canadian response that this is how it has always been is unlikely to persuade Mr. Trump.

Canadian policies premised on “making web giants pay” may also be non-starters under Mr. Trump. For the past five years, the Canadian government seemingly welcomed the opportunity to sabre rattle with U.S. internet companies. This led to mandated payments for streaming services to support Canadian film, television and music production; link taxes that targeted Meta and Google to help Canadian news outlets; and the multibillion-dollar retroactive digital services tax that is primarily aimed at U.S. tech giants.

Not only have those policies raised consumer affordability and marketplace competition concerns, they have also emerged as increasingly contentious trade issues. If the trade battles with the U.S. continue, the pressure to scale back the policies will mount.

Beyond rethinking established cultural and digital policies both new and old, the bigger changes may come from re-evaluating the competitive impact of policies that rely heavily on regulation just as the U.S. prioritizes economic growth through deregulation. Proposed Canadian privacy, online harms and AI rules have all relied heavily on increased regulation, looking to Europe as the model.

For example, consider the Canadian approach to AI regulation in the now-defunct Artificial Intelligence and Data Act. It specifically referenced the European Union’s regulatory system, which establishes extensive regulatory requirements for high-risk AI systems and bans some AI systems altogether.

However, the European approach is not the only game in town. Mr. Trump moved swiftly to cancel the former Biden administration’s executive order on AI regulation, signalling that the U.S. will prioritize deregulation in pursuit of global AI leadership. Further, the arrival of DeepSeek, the Chinese answer to ChatGPT, took the world by storm and served notice that U.S. AI dominance is by no means guaranteed.

The competing approaches – U.S.-style lightweight regulation that favours economic growth against a more robust European regulatory model that emphasizes AI guardrails and public protections – will force difficult policy choices that Canada has thus far avoided.

February 11, 2025

The End of Empire? Colonialism in Crisis – W2W 003

Filed under: Britain, Economics, France, History, Russia, USA — Tags: , , , , , , — Nicholas @ 04:00

TimeGhost History
Published 9 Feb 2025

In 1946, the old colonial empires of Britain and France struggle to maintain control as nationalist movements rise and their economies crumble. Meanwhile, two new superpowers — the U.S. and the USSR — seek to reshape the world in their image, using decolonization as both an ideal and a tool for influence. As the colonial order fractures, global power shifts, and the battle for dominance begins.
(more…)

February 8, 2025

Interprovincial trade barriers in Canada

Filed under: Cancon, Economics, Government, History — Tags: , , , — Nicholas @ 03:00

In the National Post, Jamie Sarkonak pours some icy cold water on the fever dream that we can fix what ails us economically with this one neat trick:

Understand what an interprovincial trade barrier is: it isn’t a simple matter of repealing tariffs, because internal tariffs don’t exist — provinces aren’t allowed to impose them. Instead, barriers take the form of red tape that differs in shade by province; if there are 10 provinces that each regulate, say, what shape of toilet seat is required to be used on a construction site, expect 10 different rules on the matter (Ontario requires a gap at the front of the seat; Alberta doesn’t care).

For Canada’s toilet seat manufacturers, that’s another level of complexity that can complicate production and make it costly to expand to new jurisdictions.

Now repeat the mental exercise for every other provincially regulated product: food, alcohol, pesticides, lumber and so on. And again, with all the other provincially regulated things you can buy but not hold: massage therapy, legal services, hair and aesthetic services, provincially regulated securities.

It adds up to a lot, and that’s by design: in 1867, the Constitution explicitly handed authority over most sectors to provincial governments. Provincial regulations, and by extension, interprovincial trade barriers, are central to provincial autonomy.

Theoretically, rule consolidation is a good deal. It would be far easier to do business in Canada if it worked more like one country with one set of rules, rather than a heterogenous group of 10 micro-states packed into one.

On the taxpayer side, there are savings to be had, too: regulatory bodies use public funds and there are (theoretically) savings to be had by centralizing the offices of 10 different sheriffs into one. Estimates vary, but lifting barriers is thought to add a boost of $80 billion (International Monetary Fund) to $200 billion (Canadian Federation of Independent Business) to the economy.

But standing in the way of free-trade utopia are the practical considerations, the big one being protectionism. Making its case in the Journal de Montreal, William Rousseau put it well: “The abolition of these barriers can even be economically harmful, because for each barrier that blocks a company from the rest of the country, there is a Quebec company that benefits from it and whose business model takes this barrier into account.” The exact same can be said for any province.

This is why I thought well of Pierre Poilievre’s recent trial balloon about ways to coax the provinces into reducing interprovincial trade barriers by … let’s be honest … providing a financial bribe from the federal government. By allowing the individual provinces to “capture” some of that “lost” revenue, it may provide enough incentive to start dismantling at least some of the structural barriers to free trade within Confederation.

February 2, 2025

Captain Trumpmerica versus the Post-national Maple Protectionists

Filed under: Bureaucracy, Business, Cancon, Economics, Media, Politics, USA — Tags: , , , , , , , — Nicholas @ 03:00

Donald Trump has made picking fights with the corrupt oligarchs of Mexico and Canada a key part of his appeal to American voters. Canada used to be a proud nation, but after years of deliberate mismanagement and stubborn opposition to innovation and growth, we’ve become — as Justin Trudeau so smugly put it — the first “post-national state” that has “no core identity [and] no mainstream”, because we’re a plaything for the WEF and other transnational organizations. Elizabeth Nickson calls us a “failed state” and that swapping in globalist WEF’er Mark Carney for globalist WEF’er Justin Trudeau will make no positive difference:

25% tariffs will ruin us. The tariffs mean one million small businesses — all which sell to the U.S. — will contract and many will close their doors. And then Trump, as he promised the unions, will pull “our” auto industry. Then we’re done.

Who is to blame for this?

The following is going to be crude because Canada is so boring (that’s deliberate) that no one cares. There are a thousand ultra-complex rationales on why Canada is failing and all they do is obfuscate. I’m not pulling punches, softening rhetoric — it is bad. It is urgent. This is the death of something that 75 years ago was shining, sunlit, exciting. That country? That country was killed by the Laurentian elite, weak, cosplaying Marxism to stay in power, themselves outwitted by investment bankers who plan to steal everything not nailed down. In so doing new elements were forcibly injected into the population: envy, resentment of the successful, sloth, the refusal to grow up, be strong and independent. We effectively sit on top of the U.S., seething with envy, in wet diapers.

We are a broken country. Everyone who understands the world knows this. The only people who don’t are deluded Canadian socialists, which is to say our entire elite and all our “knowledge class”. Dissent is ignored. Or jailed.

Central banker Mark Carney, WEFer paramount, is being parachuted into the Liberal party in order to sell us off to the investment banks who will harvest us for our resources. Our people? Future serfs in Special Enterprise Zones. We already have the regulation in place. No taxes, no worker rights, no enviro controls, no self-determination, no agency, no freedom. Time frame? Ten years, twenty at the outside. The inevitable end of hard-core socialism.

That is what Carney did to Canada in the ‘08 crisis, a crisis entirely created by larcenous government and investment bankers: he loaded us up with so much debt that the moment the economy turned, the working class — and Canada is now 75% working class — paid for it through interest rates so high they crippled and broke every middle class family with a mortgage. Then, he moved to England and did it to the English. His name there? Mark Carnage. During the ’08 crisis, he in Canada and the UK and Obama in the US transferred trillions in public wealth to the investment banks to keep them going after the worst crisis since ’29. A crisis they caused. That was the people’s money, not theirs.

However, as Peter Menzies points out, our Laurentian Elite are still 100% protecting us from the baleful influence of American culture … well, the commercial bits anyway:

Next Sunday, the federal agency responsible for the flourishing of national culture and identity will be swamped with complaints. The grumbling will emanate from Canadians enraged they can’t get more American culture. Yes, America may be in the process of humiliating Canada as its lamest of lame duck leaders, Prime Minister Justin Trudeau, waddles into the sunset. And, for sure, most of us are mortified that U.S. President Donald Trump has chosen to make an example of us as he launches his mission to bring the globe to heel and Make America Great Again.

But the bitching directed in the days to come at the Canadian Radio-television and Telecommunications (CRTC) headquarters in Gatineau will originate from Canadians angry they can’t watch American Super Bowl TV ads along with the game. A perennial contender to be the most watched TV event in Canada, the Super Bowl also has traditionally been the most controversial event on the CRTC’s calendar.

The USA can slap us silly with tariffs. It can send hundreds of thousands of us into unemployment and despair. It can mock our disinterest in maintaining the essentials of nationhood and drive us into unsustainable debt. Trump can brutalize our national esteem and taunt us for our cavalier attitudes towards the defence of our sovereignty. And he can lick his big beautiful lips while pondering our potential as the 51st state.

But what will really light us up Feb. 9 will be being unable to watch Meg Ryan and Billy Crystal reinvent their famous restaurant scene from When Harry Met Sally or Michelob Ultra’s production starring Willem Dafoe and Catherine O’Hara as a couple of pickleball hustlers. Or Matthew McConaughey channeling legendary Chicago Bears coach Mike Ditka for Uber Eats. And the Clydesdales. Everyone loves those Budweiser Clydesdales, particularly the cute little foal making a debut.

It doesn’t matter that the ads cost $7 million U.S. (which will convert into heaven only knows how many bazillion loonies in the months ahead) for a 30-second spot. Or that for more than a decade many of the commercials have been available on YouTube. Canadians don’t want to watch a Super Bowl adorned with Government of Ontario and Maple Leaf Foods ads. They want to watch the game like real Americans and relish the full, unfettered American experience.

At the National Post, a sad recounting of just how badly we’ve been let down by our politicians — and not just recently … this is a decades-long list of conscious self-harm for short-term domestic political advantage:

Bold counter-attacks against the U.S. can’t work, because all the ideas Canada could have put into action to make such a response viable are collecting dust on the cellar shelf. Drop interprovincial trade barriers that amount to a $200-billion penalty on the national economy every year? That only became a serious conversation in the last month. It should have been a serious conversation 10 years ago, if not more.

End supply management? Out of the question — think of the Quebec votes such a move would cost. The Big Milk lobby is a strong one.

How about resource development? Because Canada is ultimately a resource-exporting economy? No; we’ve been cancelling energy projects at the slightest objection and building more legislation to stand in their way. Industries like mining and fishing, already mired in growth-choking regulations, are increasingly refashioned by governments into welfare and “reconciliation” initiatives, repelling private investment that would have brought prosperity to the country as a whole.

Diversify away from the Americans? We’ve only done the opposite: since 2017, Canadian trade has become more focused on the U.S.

Canada should be a prosperous, growth-oriented economy, but instead, its government — and the people who continuously vote for economy-stagnating policy — settle for subsistence and redistribution of a shrinking pie of wealth. Their choices for the past decade have left us without enough fat to get through a cold trade winter.

Prompt retaliatory counter-tariffs are hence unwise. Such a move would put Canadians in the path of two separate blows, one from the front, the other from the back. And while immediate counter-tariffs could affect Americans whose support the president depends on — as was the case in the 1930s, when Canadian counter-tariffs prolonged the American Great Depression (while inflicting domestic pain) — those Americans have much bigger economic fat stores. In a trade war of attrition, expect Canada to lose.

That leaves us, unfortunately, with the less-glamourous immediate option: play this by the book. The United States-Canada-Mexico free trade agreement, which will be violated by any across-the-board tariff Trump applies, needs to be challenged with the mechanisms agreed upon by party states. During the process, Canada must remind Trump that it’s just following the agreement that he made.

QotD: Tariffs

Filed under: Business, Cancon, Economics, Quotations, USA — Tags: , , , , — Nicholas @ 01:00

Who is punished by tariffs on imported goods? Let’s go through the steps. The Canadian government imposes high tariffs on American dairy imports. That forces Canadians to pay higher prices for dairy products and protects Canada’s dairy producers from American competition. What should be the U.S. government’s response to Canada’s screwing its citizens? If you were in the Trump administration, you might retaliate by imposing stiff tariffs on softwood products built from pine, spruce and fir trees used by U.S. homebuilders. In other words, the U.S. should retaliate against Canada’s harming its citizens by forcing them to pay higher dairy product prices, by forcing Americans through tariffs to pay higher prices for wood and thereby raising the cost of building homes.

Walter E. Williams, “Economics Reality”, Townhall.com, 2020-02-04.

January 17, 2025

Trump’s demands include some things that would be quite beneficial to Canada

Filed under: Bureaucracy, Business, Cancon, Economics, Government, USA — Tags: , , , , , , — Nicholas @ 03:00

In the National Post, Bryan Schwartz suggests that some of the things Trump has raised as issues in Canada/US trade would be economically sensible for Canada to address because they’d reduce costs of doing business in Canada which would be good for all Canadians (except the crony capitalists in the blatantly protectionist “supply management” cartels):

US President-elect Donald Trump trolling about Canada becoming the 51st state of the union does seem to have directed attention to our bilateral trade situation wonderfully.

The threatened Trump tariffs would hurt both the United States and Canada in many ways. But the U.S., with a larger and more productive economy (on a per capita basis), is better able to sustain the immediate pain. The economic pressure on Canada is, therefore, serious and credible.

Canada should first address issues that are of particular importance to the Trump administration. The incoming president tends to emphasize national security, even over economic nationalism. The authority of the president, under the inherent powers of the office and congressional statutes, is greater if the issue relates to national security.

The same holds under international trade agreements. The president can raise issues that Canada can address in a prompt and reasonable manner. These include border security and increasing Canada’s commitment to contributing its fair share to international alliances, which would include increasing military expenditures.

Second, Canada should recognize that external pressures can provide opportunities to do things that are in this country’s own interests, but are otherwise politically difficult. Outside pressures have in the past encouraged Canada to adopt several measures that are good for the country, such as reducing pork-barreling and regional favouritism in government contracting.

Canada’s dairy protectionism provides a good example of a trade concession that would benefit Canada, as it is unfair to lower-income Canadians and, in the long run, hurts the industry itself. An industry more exposed to competitive pressures would be incentivized to be more productive and seek to expand into international markets.

Australia has shown how such marketing boards can be abolished in a manner that gives some time to the industry to adjust and ultimately benefits all concerned. Canada could similarly rid itself of its outdated and counterproductive Freshwater Fish Marketing Corporation, as well. To the extent that the United States pressures us to eliminate such supply management systems, it is actually doing us a favour.

Likewise, given that the U.S. is moving away from suppressing free expression in cyberspace, Canada would benefit from joining such initiatives rather than continuing down the path of having government or big companies effectively engage in censorship under the guise of fighting “disinformation”. The best remedy for any wrongheaded speech is rightheaded speech, not censorship.

At Dominion Review, Brian Graff steals a line from George C. Scott’s portrayal of Patton who said (in the film, not in real life) – “Rommel, you magnificent bastard. I read your book!” after reading the book of Trump’s Trade Representative, Robert Lighthizer:

Lighthizer wrote a book (released in June 2023) about his trade views and experience entitled No Trade Is Free: Changing Course, Taking on China, and Helping America’s Workers, which I just read. I only became aware of Lighthizer in November, in part because of a review of his book in The Guardian.

I don’t think Lighthizer is a bastard (literally or figuratively). He is hardly magnificent, but his book should be required reading for Canadians interested in our upcoming negotiations with the US. Our government would learn how best to counter the US by preparing a strong strategy and going on offence even before negotiations begin.

In short, we should not give away anything for free. This is Lighthizer’s position in matters of trade. For example, Canada should not volunteer to meet the two percent defense spending target ahead of negotiations. If anything, Canada should be accusing the US of whatever complaints we can muster. Trump might complain about the Canadian border being porous when it comes to people and drugs, but we can make the same claims, and add on the fact that the US should do more to stop the flow of illegal guns into Canada across our southern border.

Lighthizer provides a history of the US based around the idea that the US revolution and the constitution were a reaction to the mercantilist policies of Britain, which wanted to export manufactured goods and import only raw materials, while also limiting US trade with the rest of the world. Here is Lighthizer’s essential view:

    Today, the tide has turned against the argument for unfettered free trade, in no small part because of the changes we made in the Trump administration. More broadly, evidence and experience have shown us that free trade is a unicorn – a figment of the Anglo-American imagination. No one really believes in it outside of countries in the Anglo-American world, and no one practices it. After the lessons of the past couple decades or so, few believe in it even within that world, save for some hard-core ideologues. It is a theory that never worked anywhere.

This is his critique of the neoliberal free trade approach:

    According to the definitions preferred by these efficiency-minded free traders, the downside of trade for American producers is not evidence against their approach but rather is an unfortunate but necessary side effect. That’s because free trade is always taken as a given, not as an approach to be questioned. Rather than envisioning the type of society desired and then, in light of that conception of the common good, fashioning a trade policy to fit that vision, economists tend to do the opposite: they start from the proposition that free trade should reign and then argue that society should adapt. Most acknowledge that lowering trade barriers causes economic disruption, but very few suggest that the rules of trade should be calibrated to help society better manage those effects. On the right, libertarians deny that these bad effects are a problem, because the benefits of cheap consumer goods for the masses supposedly outweigh the costs, and factory workers, in their view, can be retrained to write computer programs. On the left, progressives promote trade adjustment assistance and other wealth-transfer schemes as a means of smoothing globalization’s rough edges.

This section is also key:

    … mercantilism and a free market are dramatically different systems, with distinctions that are important to note. Mercantilism is a school of nationalistic political economy that emphasizes the role of government intervention, trade barriers, and export promotion in building a wealthy, powerful state. The term was popularized by Adam Smith, who described the policies of western European colonial powers as a “mercantile system.” Then and now, there are a vast array of tools available for countries seeking to go down this path. Mercantilist governments, for instance, frequently employ import substitution policies that support exports and discourage imports in order to accumulate wealth. They employ tariffs, too, of course, and they limit market access, employ licensing schemes, and use government procurement, subsidies, SOEs, and manipulation of regulation to favor domestic industries over foreign ones.

The focus of the book, and the main villain, is China, followed closely by the World Trade Organization (WTO). Canada gets less than 77 mentions, Mexico gets 99 mentions in the first 352 pages of 576 (the e-book stops counting at 99), and Japan gets 99 mentions in the first 400 pages. Compare this to China, which gets 99 mentions within the first 101 pages alone.

January 4, 2025

Can Javier Milei Make Argentina Great Again?

Filed under: Americas, Economics, Government, History, Liberty, Politics — Tags: , , , , , , , , — Nicholas @ 04:00

Adam Smith Institute
Published 3 Jan 2025

In November 2023, Argentina elected Javier Milei, a libertarian economist armed with a chainsaw and a bold plan to rescue the country from decades of decline. Facing 142% inflation, a crumbling peso, and 40% poverty, Milei slashed spending, deregulated markets, and delivered a historic budget surplus — all within a year.

Sam Bidwell dives into Milei’s radical reforms, exploring the challenges that have made them necessary. He traces the country’s rise as a global economic powerhouse in the early 20th century, its decline through years of government intervention and Peronism, and its resurgence under Milei’s leadership.

Discover how this fiery libertarian turned Argentina’s economic fortunes around — and what the world can learn from his audacious blueprint for recovery.

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TIMESTAMPS

00:00 Start
00:53 Golden Years
02:59 Decline of Argentina
05:20 Peron
08:47 The Legacy of Peronism
11:56 After the Falklands
15:38 Javier Milei
18:17 Challenges
24:31 Lesson for the UK and the wider world

November 26, 2024

Crony Capitalist Canada – “Conservative Leader Pierre Poilievre … has vowed to protect Big Dairy just like every other party leader”

Filed under: Bureaucracy, Business, Cancon, Government — Tags: , , , , , , — Nicholas @ 03:00

In the National Post, Chris Selley discusses the latest attempt to further protect the outrageous profits our dairy companies make by overcharging Canadians for milk, butter, cheese, and other dairy products:

That unelected senators should not overrule the will of the House of Commons has always struck me as a rule most Canadians could agree on, whatever they think ought to happen with Canada’s upper chamber. Senators can propose amendments to bad bills, rake ministers over the coals at committee, call witnesses the House wasn’t interested in for whatever reason, raise red flags that haven’t yet been raised, all to the good. But gutting a bill, as the Senate has done with proposed legislation that would protect supply management in Canadian dairy, poultry and eggs even more than it’s already protected, is not kosher.

Not all violations of this policy are equally appalling, however. When the House of Commons is clearly not operating for the benefit of Canadians, when its focus demonstrably isn’t the public good but rather coddling and currying favour with special interests, it behooves the Senate to intervene as strenuously as possible while still at the end of the day respecting the lower chamber’s democratic legitimacy.

Coddling and currying favour is exactly what C-282, a private member’s bill from Bloc Québécois Luc Thériault, does: It proposes to make it illegal for a future government to lower the tariff rate for foreign products in supply-managed industries. You could call it the “no to cheaper groceries act.” Some senators wish to neuter it, such that it wouldn’t apply to any existing trade deals or deals already in negotiation. Bloc Leader Yves-François Blanchet had originally demanded the bill passed as one condition of keeping the Liberals afloat (although his deadline to do so has passed).

Fifty-one MPs of 338 opposed the pricey-groceries act at third reading. I would have said “only 51” except that’s a shocking number: 49 Conservatives and two Liberals, Nathaniel Erskine-Smith and Chandra Arya. It’s almost reason for hope … except of course that Conservative Leader Pierre Poilievre voted for it, and has vowed to protect Big Dairy just like every other party leader. It goes without saying that Prime Minister Justin Trudeau not only supported it, but has come out against the Senate’s amendments.

“We will not accept any bill that minimizes or eliminates the House’s obligation to protect supply management in any future trade agreement,” Trudeau reassured Blanchet in the House on Wednesday. ” No matter what the Senate does, the will of the House is clear.”

I mean, what elected politician in Ottawa gives a shit about Canadians being gouged on grocery staples every week? They’d rather get the support of the milk, poultry and egg crony capitalists than help ordinary Canadians, and they’re terrified of being portrayed as anti-Quebec in an election year. Spineless cowards, the lot of them.

November 1, 2024

Canada – 30 protectionist marketing boards wrapped in a flag

Filed under: Bureaucracy, Cancon, Government — Tags: , , , , — Nicholas @ 05:00

In The Line, Greg Quinn points out just how blatantly hypocritical Canada’s politicians and diplomats are in any discussion with other nations when the subject turns to free trade:

Let me say this upfront, and clearly: when it comes to international trade, Canada is protectionist to an astonishing degree whilst at the same time claiming it is a supporter of global free trade. It wants every other country to open up (and complains when they don’t, or when they stand their ground) whilst ensuring access to the Canadian market is more difficult. This is a result of federal policy, inter-provincial restrictions, and vested interests. And it is flagrantly hypocritical.

When it comes to dairy, beef and the mutual recognition of professional qualifications, for example, Canada’s claim to openness is simply a lie. Agricultural groups and businesses dominate and control the local landscape and attempts to either overcome that (or bring external companies in) have failed on many occasions over the years. This could well get worse if the Liberals agree to what the Bloc Québécois has demanded — even more dairy protections — in a desperate attempt to remain in power for a little while longer.

Some of these issues are well known to Canadians — particularly the domestic ones, or the ones that touch on national unity frictions. But I’m not sure Canadians understand how this is perceived globally, including by Canada’s allies. Readers may recall that there was a mild furore a while back when the U.K. dared to pause trade negotiations as Canada refused to move on access for British cheese. There were accusations of the U.K. not playing fair and such like.

It’s bad enough that we “protect” Canadians from lower-priced foreign food, but we even manage to maintain inter-provincial trade barriers that directly harm all Canadian consumers:

Then we have interprovincial trade barriers. According to the Business Council of Alberta in a 2021 report, these barriers are tantamount to a 6.9 per cent tariff on Canadian goods. They also noted that removal of these could boost Canada’s GDP by some 3.8 per cent (or C$80 billion), increase average wages by some C$1,800 per person, and increase government revenues for social programming by some 4.4 per cent.These barriers hinder internal trade between the provinces, including the work of those companies that import goods from other countries.

A freer market, at home or globally, would not solve all the issues that exist with prices, but it would certainly increase competition and give consumers more choice. What exists at the minute is a pretense of choice.

Opening up the Canadian market would certainly benefit other countries, including my own United Kingdom, and there would be some impact on local business and producers. This is true, and acknowledged. But opening itself up to more global trade and dismantling internal trade barriers — and these are things all the politicians insist they like the sound of in theory — would be a win-win for Canadian consumers and Canadian society as a whole. Some big companies and carefully coddled special interests would be upset, but they aren’t supposed to be the ones making decisions in a democracy, or in a free market.

October 10, 2024

Trump’s tariff proposals will rival Smoot-Hawley for self-inflicted economic woes

Filed under: Economics, Government, History, USA — Tags: , , , , — Nicholas @ 04:00

J.D. Tuccille explains why Trump’s economic plans are very much a curate’s egg of good and bad ideas, but the proposed tariff plans would more than compensate for any good positive effects from the rest of his proposals:

Willis C. Hawley (left) and Reed Smoot in April 1929, shortly before the Smoot–Hawley Tariff Act passed the House of Representatives.
Library of Congress photo via Wikipedia Commons.

Former president and current Republican presidential candidate Donald Trump wants to extend the tax cuts passed when he was in the White House, which are due to expire next year. That would not just be welcomed by the many Americans who would benefit, it could boost economic activity. But there’s a big problem: The protectionist tariffs favored by Trump would undo the good done by his tax cuts, reducing rather than increasing prosperity.

Tariffs Not Seen Since the Great Depression

“Former President Donald Trump’s proposals to impose a universal tariff of 20 percent and an additional tariff on Chinese imports of at least 60 percent would spike the average tariff rate on all imports to highs not seen since the Great Depression,” warns Erica York of the Tax Foundation.

Trump has actually been a little vague on the size of his universal tariff, first floating it at 10 percent while allowing “it may be more than that”, and then upping the ante to 20 percent. Either way, it’s a cost that ends up being largely paid by Americans in terms of higher retail prices and more expensive imported parts and materials for domestic manufacturing.

The Trump administration’s 2018 “tariffs resulted in higher prices for a wide variety of goods that U.S. consumers and businesses purchase,” the Tax Foundation’s Alex Durante and Alex Muresianu concluded.

Even when tariffs don’t directly affect the cost of imported goods purchased by consumers, they still drive up the prices of many things made in the U.S. The Cato Institute’s Pierre Lemieux points out that “a tariff on an input (say, steel) is paid by the American importer who will typically pass it down the supply chain to his customers and eventually to the consumers of the final good (say, a car)”. Instead of boosting domestic production, that can do harm, instead.

“For manufacturing employment, a small boost from the import protection effect of tariffs is more than offset by larger drags from the effects of rising input costs and retaliatory tariffs,” Federal Reserve Board economists found when they researched the 2018 tariffs.

That’s not to say Trump is alone in his protectionism. Last month, Bob Davis noted for Foreign Policy that “the Biden administration is the first since at least President John F. Kennedy’s time to fail to negotiate a major free trade deal, instead embracing tariffs” while Trump pursued both tariffs and trade deals.

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