May 17, 2018

Instead of business handouts, try lowering U.S.-China trade barriers

Post by Freedom Partners

The continued Sino-American trade standoff has prompted U.S. businesses to pepper Washington with requests to protect their particular industry segment from the growing fallout. Rather than engage in such tactics, which would only further escalate the tit-for-tat, policymakers should instead renew efforts to reduce impediments to trade between the two nations.

The self-inflicted casualties from recently announced tariffs are coming into greater focus.

CBS MONEYWATCH reported a compelling account of the chaos tariffs wreaked on the economy. They report China has taken explicit action to slash orders for U.S. pork, stop altogether buys of American soybeans and impose tariffs on pecans. In addition, companies like Caterpillar and Harley-Davidson said inflated costs for commodities (as a result of tariffs) are sapping profits. And more expensive steel and aluminum has led small businesses to suspend hiring plans.

Tariff troubles are further examined in The Wall Street Journal in an op-ed by former U.S. Senator Phil Gramm and Mike Solon of US Policy Metrics. They warn that the Trump administration’s steps “have increased economic uncertainty to a level that threatens to bring back the stagnation of the Obama years.” Business investment and consumer confidence have both been negatively impacted as a result, they argue.

All this preventable disruption brings us to this week’s hearing of the U.S. Trade Representative and other federal officials. They’re getting an earful about how tariffs hurt Americans.

During the first of a three-day session, “many raised concerns about how the tariffs could hurt American workers,” Politico reported. The National Association of Manufacturers hit the nail on the head in noting, “While tariffs may provide short-term relief to some, we are hearing regularly and broadly from manufacturers across the country who are deeply concerned about the harmful, albeit unintended, impacts that the imposition of proposed tariffs would have on manufacturing and jobs.”

(Freedom Partners, along with AFP and The LIBRE Initiative, submitted comments to USTR recently in conjunction with the hearing.)

Now, the Associated Press reports, U.S. businesses are lining up for special favors and handouts to protect their individual sector:

“Best Buy wants televisions to be spared from the tariffs. Sanden International (USA) of Wylie, Texas, warns it will have to lay off 39 of its 431 workers if 25 percent tariffs take effect on the components it uses to make car air-conditioning compressors. SABIC, a petrochemical manufacturer, wants some building materials struck from the tariff list.”

There’s a much simpler solution to this problem. Rather than enact tariffs and quotas – which beget more of the same from our trade partners – the U.S. should drop protectionist tactics that harm many to benefit just a few and press other nations to do the same.