Quotulatiousness

February 26, 2019

Laissez-faire versus “Fairtrade”

Filed under: Africa, Britain, Business, Economics — Tags: , , , , — Nicholas @ 05:00

In the Guardian, a sad tale of the fading bright hopes of the (relatively small number of) affluent westerners who passionately supported the “Fairtrade” movement:

When, in 2017, Sainsbury’s announced that it was planning to develop its own “fairly traded” mark, more than 100,000 people signed a petition condemning the move. Today, on the eve of Fairtrade Fortnight, the fact that most supermarkets have moved away from the standards developed by the Fairtrade Foundation is worrying.

While some grocery chains have sought the foundation’s stamp of approval, many have gone their own way. This means most consumers have little sense of which organisation is doing what to protect the wages and rights of developing world workers. Over the next two weeks, the foundation plans to focus its publicity efforts on cocoa farmers in west Africa and the way the Fairtrade mark can improve their lives.

[…]

That is a sad situation. After the great financial crash of 2008, a commodity boom that lasted from 2013 to 2017 turned into a slump that has robbed farmers and developing world governments of vital cash. Just as they were managing to stabilise their finances and set aside money to invest, the world price tumbled and wiped out their profit. Fairtrade practices protect farmers from this sort of setback and allow them to plan for the future.

Of course they have their critics. These are most mostly from the US – people who favour unfettered markets and seek to undermine the Fairtrade ideal, saying it is a form of protectionism that dampens innovation and ultimately ruins farms.

Theirs is an almost religious adherence to the free market that discounts the gains in stability and security that Fairtrade provides, and the scope of the community premium to promote universal education and the rights of women.

But without large employers making strides to adopt the standardised and transparent Fairtrade practices put forward by the foundation, it will be left to consumers to drive the project forward.

At the Continental Telegraph, Tim Worstall responds:

The Guardian tells us that the Great White Hope of global trade, Fairtrade, isn’t in fact working. On the basis that no one seems to be doing very much of it. To which the answer is great – for the only fair trade is laissez faire.

This does not mean that Fairtrade should not have been tried – to insist upon that would be to breach our basic insistence upon the value of peeps just getting on with doing what they want, laissez faire itself. But the very value of that last is that we go try things out, see whether they work and if they don’t we stop doing them. If they do then great, we do more of them.

[…]

So, trying out Fairtrade, why not? Let’s go see how many other people feel the same way? In exactly the same way we find out whether people like Pet Rocks, skunk or Simon Cowell. Product gets put on the market we see whether it adds to human welfare or not. If people value it – and revealed preferences please, by actually buying it – at more than the use of those scarce resources in other uses then that’s adding to human welfare and long may it thrive. If it doesn’t, if it’s subtracting value from the human experience, then we’ll stop doing it as those trying go bust.

This is not an aberration of the system it is the system and it’s why laissez faire works. Peeps get to do whatever and we keep doing more of what works, less of what doesn’t.

Fairtrade? No, I never thought it was going to work as anything other than virtue signalling for Tarquin and Jocasta but that’s fine. Why shouldn’t Tarquin and Jocasta gain their jollies by virtue signalling? As it turns out, now that we’ve tried it, no one else gives a faeces*. So, we can stop. Except, obviously enough, for those specialist outlets like the Co Op where the odd can still gain their jollies. It being that very mark of a laissez faire, liberal, society that the jollies of the odd are still catered to in due proportion to the desire for them.

*From Gibbon, all the fun stuff’s in Latin.

November 22, 2018

QotD: They’re not “trade wars”, they’re “economic suicide bombings”

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

… this recent Facebook post by Steve Horwitz:

    Instead of “trade wars,” let’s call them what they really are: economic suicide bombings.

Indeed so.

Like physical bombings, the economic suicide bombings that are tariffs and other trade restrictions create particular jobs by destroying real wealth. Those who then resupply the wealth that is destroyed applaud the suicide bombings, and tirelessly repeat ancient, absurd dogmas to justify the bombings. But unlike physical bombings, the victims of economic suicide bombings are largely unseen and, hence, ignored.

The people – and they are many – who cling to the dogma of protectionism do so as a matter of faith. This dogma cannot withstand the scrutiny of reason or be justified by any competent observation of reality. Yet the uncivilized and destructive religion of protectionism nevertheless flourishes, no doubt in no small part because the narrow interests of a relatively small but politically powerful cabal of producers are served by the public taking to be true all the mysticism of protectionism and its alleged miracles.

Whether or not Jesus miraculously created abundance out of the scarcity of five loaves and two fish I will not here say. I am, however, quite confident that when the likes of Donald Trump, Peter Navarro, Chuck Schumer, Bernie Sanders, and Sherrod Brown promise to perform a similar miracle – that is, to create abundance out of artificially contrived scarcity – they are either delusional about their own powers or are cynically playing their congregations for fools.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2018-10-12.

November 14, 2018

QotD: Protectionism and competition

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

The ITC [U.S. International Trade Commission] acts as if American companies have a right not to be injured by foreign competition, regardless of how poorly they serve their American customers.

James Bovard, The Fair Trade Fraud, 1991.

November 10, 2018

QotD: Protectionism helps domestic producers but hurts domestic consumers

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

Protectionists always speak of tariffs and other import restrictions as impositions the burdens of which fall exclusively on foreign producers (usually, as in the case of antidumping cases, on foreign producers who have the audacity to sell their wares to us at prices that are especially low). And while domestic protectionist measures do indeed harm foreign producers, every protectionist measure is also – indeed, chiefly – a restriction on the freedom of domestic consumers to spend their money as they choose. Tariffs, antidumping duties, and all protectionist impositions make domestic citizens less free (by closing off areas of voluntary exchange that they would otherwise choose to engage in) and less prosperous (by diminishing the volume of goods and services available in the domestic market for people to consume).

Protectionism is rank economic idiocy and an unquestionable assault on liberty. And it becomes no smarter or prettier just because it is costumed in moralistic language (such as “fair trade” or “leveling the playing field”) or is pushed by your preferred political party rather than by some other political party.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-12-06.

November 3, 2018

“[I]t makes no sense to punish Americans with tariffs in order to convince foreign governments to stop punishing their citizens with tariffs”

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

Veronique de Rugy discusses the mercantilist errors that still influence politicians and voters on free trade policies:

There are many changes to domestic policy that could help protect Americans from the predations of protectionism. For instance, when considering whether or not to grant U.S. firms “trade remedies,” such as countervailing duties, officials should have to take into account the consequences for American consumers of any tariffs they’re thinking of imposing. Policy makers aren’t currently required to do that, and one agency — the International Trade Commission—is actually forbidden from doing so.

This must change. Recent developments prove that it’s dangerous to simply assume all U.S. presidents and a critical mass of legislators will remain committed to the principles of reciprocal free trade. Buyers of imported goods or products made with imported materials — which, to be clear, is all of us — can’t depend on the economic acumen of the policy makers deciding whether or not to impose tariffs. Instead, consumer protections need to be built into the regulatory process. Because there are virtually always more workers in consuming industries downstream of the trade barrier than there are in the sector receiving the protection, a requirement to take the harm to consumers into consideration would make it very hard to impose protectionist policies.

Some free trade sympathizers have floated the possibility of Congress reclaiming its power to impose tariffs from the White House. Sen. Mike Lee (R–Utah), for instance, has introduced the Global Trade Accountability Act, which would require congressional approval for tariff increases or other “unilateral trade actions.” Unfortunately, if this otherwise well-designed bill became the law of the land, it would be akin to guarding the hen house with a hungry dog instead of a fox.

An extensive literature shows that moving tariff-setting policy away from Congress (and its parochial, locally focused interests) was a critical part of reducing protectionist influence in Washington. President Trump is terrible on this issue, but in general, a president is more likely than are members of Congress to consider the interest of the entire country — and, hence, to support broad trade liberalization.

September 28, 2018

The staunch Progressive dismissal of Warren Harding and Calvin Coolidge

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

In Richard Epstein’s review of Jill Lepore’s recent book These Truths: A History of the United States, there’s some interesting discussion of the Harding and Coolidge administrations:

Lepore’s narrative of this period begins with President Warren Harding, who, she writes, “in one of the worst inaugural addresses ever delivered,” argued, in his own words, “for lightened tax burdens, for sound commercial practices, for adequate credit facilities, for sympathetic concern for all agricultural problems, for the omission of unnecessary interference of Government with business, for an end to Government’s experiment in business, for more efficient business in Government, and for more efficient business in Government administration.” Harding’s sympathetic reference of farmers is a bit out of keeping with the rest of his remarks. Indeed, farmers had already been a protected class before 1920, and the situation only got worse when Franklin Roosevelt’s administration implemented the Agricultural Adjustment Acts of the 1930s, which cartelized farming. But for all her indignation, Lepore never explains what is wrong with Harding’s agenda. She merely rejects it out of hand, while mocking Harding’s conviction.

Given her doggedly progressive premises, Lepore may have predicted a calamitous meltdown in the American economy under Harding, but exactly the opposite occurred. Harding appointed an exceptionally strong cabinet that included as three of its principal luminaries Charles Evans Hughes as Secretary of State, Andrew Mellon as Secretary of Treasury, and Herbert Hoover as the ubiquitous Secretary of Commerce, with a portfolio far broader than that position manages today. And how did they perform? Lepore does not mention that Harding coped quickly and effectively with the serious recession of 1921 by refusing to follow Hoover’s advice for aggressive intervention. Instead, Harding initiated powerful recovery by slashing the federal budget in half and reducing taxes across the board. Both Roosevelt and Obama did far worse in advancing recovery with their more interventionist efforts.

To her credit, Lepore notes the successes of Harding’s program: the rise of industrial production by 70 percent, an increase in the gross national product by about 40 percent, and growth in per capita income by close to 30 percent between 1922 and 1928. But, she doesn’t seem to understand why that recovery was robust, especially in comparison with the long, drawn-out Roosevelt recession that lingered on for years when he adopted the opposite policy of extensive cartelization and high taxes through the 1930s.

Lepore is on sound ground when she attacks Harding and Coolidge for their 1920s legislation that isolated the American economy from the rest of the world. The Immigration Act of 1924 responded to nativist arguments by seriously curtailing immigration from Italy and Eastern Europe, subjecting millions to the ravages of the Nazis a generation later. Harding and Coolidge also increased tariffs on imports during this period. What Lepore never quite grasps is that any critique of these actions rests most powerfully on the classical liberal worldview that she rejects. Indeed, Harding and Coolidge exhibited the same intellectual confusion that today animates Donald Trump, who gets high marks for supporting deregulation and tax reductions at home, while simultaneously indulging in unduly restrictive immigration policies and mercantilist trade wars abroad. Analytically, however, the same pro-market policies should control both domestically and abroad. Hoover never got that message — as president, he signed the misguided Smoot-Hawley Tariff Act of 1930 that sharply reduced the volume of international trade to the detriment of both the United States and all of its trading partners, which helped turn what had been a short-term stock market downturn in 1929 into the enduring Great Depression of the 1930s.

September 23, 2018

How to use the stock market as a scorecard during a trade war

Filed under: Business, China, Economics — Tags: , , , — Nicholas @ 03:00

At the Continental Telegraph, Tim Worstall explains how even the financial journalists at Fortune are misunderstanding what the changes in stock market values mean during Trump’s ongoing trade disputes with China:

… how stock markets react is not a good guide to the positive effects of tariffs. Quite the opposite in fact. It’s a much better guide to how we’re all getting screwed by tariffs. That is, the better the US stock market does the more evidence we’ve got of the bad effects of tariffs and a trade war.

Think on it. Why is Trump imposing tariffs? To protect American business from competition by those dastardly foreigners. Who loses in the absence of competition from the Yellow Peril? Those American consumers who would have bought those better/cheaper Chinese goods if they were able to. Who gains from tariffs? American businesses who can now gouge the American consumer a little more in the absence of those items imported from East Asia.

So, a rise in the US stock market is a guide to how much more profit American business can screw out of the American public. It’s a measure, a reasonably good and precise one too, of how much we the people are losing from the trade war and tariffs. More exactly, it’s the capitalised value of the ongoing losses we’re suffering from this restriction of our choices, the competition those who supply us face.

That is, the better the stock market performance the higher those costs and the more we’re losing the trade war. That is, as long as you accept that it is consumers, not producers, that matter, but then that’s the standard economic assumption ever since Adam Smith even if it gets lost in Washington DC often enough.

The US stock market rising in response to US tariffs is evidence of the losses from tariffs, not the gains.

August 29, 2018

The Conservative convention, bought and paid for by the friends of supply management

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

Colby Cosh relates the details of how well stage-managed the Conservative convention in Halifax was … from the point of view of the beneficiaries of supply management:

A copy of a “briefing binder” that the Dairy Farmers of Canada had given to representatives of supply-managed agriculture was carelessly discarded, found by a Calgary delegate named Matthew Bexte, and splattered onto the internet. The contents of the binder describe the strategy and outline the available forces of the supply-management squad. The resolutions being discussed by the convention included one favouring the repeal of expensive tariff protection for Canada’s egg, dairy, and poultry cartels, and the binder lists the particular responses and tactics to be used depending on how far the offending free-trade resolution advanced in the debate.

Which it didn’t. The motion in favour of letting Canadian suckers buy foreign cheese in dangerous unregulated quantities died noisily in a “breakout session,” never even reaching a vote, much less the plenary session of the convention. As the National Post’s uncannily versatile Marie-Danielle Smith documented before the briefing book was leaked, free-trade delegates had already caught the scent of a rat, complaining that the motion had been suppressed through strategic delay by operatives working for party leader Andrew Scheer.

The Dairy Farmers of Canada briefing describes this motion-suppression tactic as “Scenario 2,” calling it a “sub-optimal” outcome: “It buys us (supply-managed farmers) a reprieve, but doesn’t put the issue to rest.” According to the briefing notes, if the motion had passed in the Friday breakout session, that would plunge the world into “Scenario 3.” Under Scenario 3, a Friday evening reception at an Irish pub, with free food and potables, would come into play: quota-sucking farmers and their public-relations goons would have been given a chance to mingle with well-lubricated CPC delegates, with “infographics on a slideshow” pulsing subliminally in the background.

The hope here would be to prevent a devastating “Scenario 5,” in which the destruction of supply management came before the whole CPC assembly for a vote and won it. The prospective talking points accompanying Scenario 5 warn that “Members of the Conservative Party of Canada have sent a clear signal that they do not support Canadian farmers” and they hiss menacingly that “Canadians will remember the position taken by Conservatives today.”

Fortunately, even in the event of a flat-out Scenario 5, there would still be what the book calls the “Safety Net.” The safety net is that annual party conventions are meaningless, expensive balderdash anyway. Or, as the Dairy Farmers of Canada (DFC) book puts it: “The powers of the Leader are far-reaching in preventing a policy from being in the party platform. DFC has been told by the Leader’s office that he will exercise this power … regardless of the outcome at convention.”

Good old Andrew … he knows who put him in his current position and has signalled in advance that he’ll “stay bought”. Too bad for Canadian consumers, but great news for the leeches who benefit from the market distortions of supply management.

August 12, 2018

Misunderstanding what the trade deficit represents

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

In a post from last week, Tim Worstall explains why Donald Trump is wrong about the economic impact of a trade deficit:

I should note here that I didn’t, because as a foreigner I can’t, support The Donald at the last election. But I didn’t support Hillary even more. So this is more about really, actually, insisting that Trump is wrong on trade issues rather than just the more general he’s wrong about everything common in the US press.

[…]

What Trump, DiMicco and Navarro are getting wrong is this, the GDP equation.

Y = C+I+G+(X-M)

GDP is consumption plus investment plus government spending plus the trade balance – and minus it if there’s a trade deficit. So people look at this and think yep, if there’s a trade deficit than that makes Y, GDP, smaller!

But this is a mistake, an error. For, as the textbook immediately goes on to explain, what is it that we do with imports? Well, we either consume them, use them in investments or government buys them. So all imports are already in C and I and G. Meaning that if we don’t deduct them we’ll be double counting them. So, to avoid double counting we subtract them.

Trump and his advisers are simply wrong on this. The trade deficit doesn’t reduce the size of the economy. They’re getting it wrong simply because they’re not reading the second page of the explanation of the GDP equation.

August 10, 2018

QotD: Demands for “fair” trade

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

Whenever you hear someone demand that trade be made “fair” – whenever you hear someone plead for trade to be conducted on a “level playing field” – you can bet your pension that you are hearing a domestic producer, or its spokesperson, soliciting the state for protection from competition. You are hearing sweet words mask a sour plea for monopoly power. You are hearing a greedy corporation or other politically powerful producer group appeal to those who hold power that that power be wielded against fellow citizens who dare to spend their own money in ways that promote their and their families’ best interests rather than in ways that promote the interests of the greedy corporation or other politically powerful producer group.

You are hearing, in short, a seeker of unfair privilege – a demander that the playing field be tilted against consumers’ and society’s broad interests and toward its own narrow interests.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-11-01.

August 7, 2018

“[Trudeau’s] ideology is jeopardizing 20% of the Canadian economy”

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

Brandon Kirby on Prime Minister Justin Trudeau’s failing efforts to negotiate with the United States on trade:

Trade with Canada constitutes 2% of America’s GDP and trade with America constitutes a whopping 20% of Canada’s GDP. My home province of New Brunswick finds 50% of its private sector exporting to the U.S. – NAFTA is of vital importance to our economy.

The dwindling efforts of Trudeau’s cabinet to negotiate a deal with the Americans could become his government’s greatest failure. With tariffs already being imposed on steel and aluminum, NAFTA is potentially unraveling before our eyes and along with it, the Canadian economy.

Trudeau’s American counterpart isn’t known for his vocal support of trade and yet he handed Canada everything on a silver platter at the recent G7 summit. He offered to remove all tariffs and subsidies on imports and exports, provided Canada did the same. This is about as fair an offer as one could expect. Trudeau retaliated by insisting Canada had been insulted.

The trouble with Trudeau is precisely that. He was given a talking point. He developed rhetoric rather than substance. Akin to Marco Rubio’s disaster of a debate performance, who refused to go off script even when he was being called out for scripted answers, Trudeau had a talking point. It was a good one, Canadians and Americans died together in the mountains of Afghanistan to bring justice for Americans who died on September 11th. Trump alluded to our tariffs on their dairy farmers as a national security threat. But when Trump acquiesced, Trudeau kept to his talking points and refused to go off script, even when his talking points no longer made sense.

The initial renegotiation began with Trudeau’s government attempting to include a chapter on gender. The Americans weren’t enthusiastic about devoting a significant portion of their time at the negotiations to discussing an unenforceable chapter of the deal, but Trudeau pressed on.

The liberal rationale in the briefing notes was leaked, “Think back 20 years and remember the early discussions of labour and environment in the context of trade agreements.”

Environmental and labour standards were included in the negotiations of decades past because a country that has humane labour standards is at a trade disadvantage to countries that neglect their workers and their environment. Gender doesn’t have any bearing on trade. His ideology is jeopardizing 20% of the Canadian economy.

July 31, 2018

QotD: Hostility to international trade

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

Much suspicion of, and hostility to, international trade is akin to atavistic superstitions that raised in some peoples suspicions of, and hostility to, mating with individuals outside of those people’s ethnic or racial or religious groups. “Only We are worthy of your seed or your womb – They are not!” “Corruption of the purity of Our race is the inevitable result of your conjugal mixing with Them!”

Or only slightly differently: protectionism is much like in-breeding. Like in-breeding, protectionism weakens the economy that practices it. Like in-breeding, protectionism causes the group that practices it to become ever-more stupid, uncreative, fragile, and vulnerable – a population of pathetic misfits destined to be weaker and poorer than are their more-cosmopolitan and open neighbors.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-09-14.

July 27, 2018

“Tariffs are the classic example of government interventions with concentrated benefits and dispersed costs”

Filed under: Cancon, China, Economics, Europe, Politics, USA — Tags: , , , , — Nicholas @ 05:00

Robert Higgs on what he describes its supporters as “waging the trade war to end all trade wars”:

… even as Trump spouts venerable fallacies to justify and seek support for his destructive trade policies and related ad hoc actions, he and his supporters have sometimes offered a strange defense of their tactics: they purport to be seeking, at the end of the game, universal free trade, a world in which all countries have abandoned tariffs, quotas, subsidies, and other government intrusions in international exchange. In Wilsonian terms, they claim to be waging the trade war to end all trade wars. The idea is that by raising U.S. tariffs, they will induce other governments to lower and ultimately eliminate their own.

Of course, this rationale may be nothing more than wily claptrap, tossed out as a rhetorical bone to Republicans who favor freer trade. The administration’s actions to date certainly give no indication that it is aiming at global free trade. On the contrary. So the Wilsonian gambit may consist of nothing but hot air.

But if Trump and his trade advisers actually take this tactic seriously, they are deluding themselves.

First, and surely obviously, U.S. tariff increases will not induce other governments to lower their own, but to raise them, as the EU, China, Mexico, Canada, and other trading partners have already demonstrated. That’s why it’s called a trade war — because the “enemy” shoots back. History has shown repeatedly, most notably in the early 1930s, in the wake of the Smoot-Hawley Tariff Act of 1930, that such trade wars only spiral downward, choking off more and more trade, despoiling the international division of labor in accordance with comparative advantage, and thereby diminishing real income in all the trading countries.

Second, the prospect of the U.S. government’s ever abandoning tariffs is slim to none. Tariffs are the classic example of government interventions with concentrated benefits and dispersed costs. This character makes them attract great support from protected special interests and little opposition from the general public — including other producers — when they are enacted or extended. They are easy for politicians to put in place and diabolically difficult for anyone to eliminate. Although the costs are great — much greater than the benefits for the economy as a whole — hardly anyone’s costs are great enough to justify mounting a potent political attack on the tariffs.

People who get tariffs put in place to protect them in the first place are well positioned to marshal strong opposition to any political attempt to eliminate these taxes on consumers who buy from competing, foreign suppliers. Consumers rarely know anything about why foreign goods are priced as they are, and producers, in general, are usually not affected enough by tariffs on imported raw materials and components to justify well-funded politicking against them.

July 26, 2018

The Trump tariffs are working exactly as designed

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

That is, they’re becoming a drag on the economy and will take away a lot of the economic activity that was stimulated by the tax cuts enacted earlier. Warren Meyer says that it’s time that congress reclaimed the tariff powers it has outsourced to the executive branch over the years:

I Know Congress Hates To Challenge A President of Its Own Party, But…

…Congress simply has to pare back the tariff authority it has delegated the President. It is simply insane that Trump can just unilaterally impose 20% tariffs on foreign automobiles, a $200 billion new tax on US consumers.

It is appalling to see Trump following the usual blue model of economic regulation, imposing one intervention after another, each meant to fix the unintended consequences of the last intervention. Steel tariffs increased costs to domestic auto makers, so Trump proposes tariffs on foreign autos. When tariffs result (inevitably) in counter-tariffs on US agricultural exports, Trump proposes more agricultural subsidies. People (not me) lament gridlock in government and want more fluid lawmaking — well here it is. And it sucks. It is mindless and reactive and emotional and totally ignorant of economics.

These tariffs, when combined with earlier actions, will result in tax increases on consumers that swamp the tax cuts Trump and the Republicans were so proud of last year.

Jon Gabriel on the most recent “fix” for one of those unintended consequences:

A few months back, President Trump declared that “trade wars are good, and easy to win.” Now, just as nearly every economist on the left and right predicted, Americans are being hurt.

The White House slapped tariffs on imported steel and aluminum. China retaliated with planned tariffs on soybeans, meats and various agricultural products. Mexico, Canada and the European Union also struck back at farm goods and other U.S. exports.

A smart leader would notice his mistake and end the destructive policy. Instead, Trump declared that “tariffs are the greatest” and created a multibillion-dollar federal program to mitigate a small part of the mess he created.

Since Agriculture Secretary Sonny Perdue estimated $11 billion in damage to the industry, he announced a $12 billion payoff to make up the difference.

The administration used emergency executive powers created during the Great Depression; that way Congress wouldn’t get to weigh in.

“This is obviously a short-term solution that will give President Trump time to work on a long-term trade policy and deal to benefit agriculture as well as all sectors of the American economy,” Perdue told reporters.

It’s certainly short-term, but hardly a solution. Trade deals and networks are disrupted, farmers can’t plan for the future, and non-agricultural industries are still losing money. Not to mention all the American consumers watching prices rise on all sorts of household goods.

But red states have a lot of farmers and the midterms are just three months away. Maybe borrowing a few billion dollars will hide enough economic pain to convince voters to keep Republicans in power for two more years.

June 23, 2018

QotD: The protectionist two-step, Alberta craft-beer variant

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

Economic protectionism has two classic rationales. Sometimes, as in the case of Alberta’s clumsy attempt at an interprovincial tariff on craft beer, it is undertaken in the name of defending small, emerging “infant industries” that a government wishes to give time to establish themselves in its territory. And sometimes, as in the case of Canadian dairy supply management, it is done to defend “strategic” industries that have existed forever and that allegedly create an irreplaceable quantity of employment and profits.

Give yourself a gold star if you spotted that these canonical pretexts for trade barriers are contradictory. The inherent promise of protection for “infant industries” is that they will grow up and leave the nest. But, oops: by the time they reach adulthood, they may have become too “strategic” to expose to market forces. Heads, the favoured firms win; tails, the consumer loses.

Of course, on the level of fine detail, the arguments for trade barriers are manifold and complicated. (If you get into a quarrel about dairy, and take the free-trade side, you will find them being changed by your interlocutor every 30 seconds.) Alberta’s program for supporting small brewers has an unclear, touchy-feely small-is-beautiful justification. By design, the tariff applies only to businesses that have no intention of attaining industrial scale. It’s right there in the term “craft brewing,” isn’t it? Whatever the esthetic merits of craft beer, this is surely the deliberate encouragement of what the urbane left likes to calls “precarious” jobs that could be flung into disarray by a bad season, a shift in fashions, or a supply problem.

And, also, it’s illegal.

Colby Cosh, “A court refuses to swallow Alberta’s thinly disguised craft-beer tariff”, National Post, 2018-06-22.

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