Policy Analysis No. 91

Our Trade Laws Are a National Disgrace

By James Bovard
September 18, 1987

Executive Summary

The U.S. Department of Commerce is almost as ingenious at discovering “economic crimes” as was Stalin’s Soviet Union. In the kangaroo court system of trade investigations held in the United States, foreign businesses are almost certain to be convicted of some offense. U.S. laws on fair trade are far more arbitrary and far more punitive than the fair-trade laws of most of our trading partners. They inevitably result in less competition, higher prices, and increased government interference in the marketplace.

Since 1983, the United States has brought more unfair-trade cases than any other country in the world. [1] Since 1980, the Commerce Department has found only 6 percent of the imports it has investigated not guilty of unfair trade practices.[2] And Commerce will investigate almost any import if so requested by a domestic industry. As one of the State Department’s top trade experts has observed, “I think the Commerce Department can prove illegal dumping against any import it chooses.”[3]

Unfair trade is one of the biggest growth industries in the country. In the past decade, Congress has repeatedly expanded the definition of unfair practices. Increasingly, what was deemed fair last year is illegal this year, and it demands retaliation. As former International Trade Commission (ITC) chairman William Leonard has observed, “Every time Congress takes another whack at the law, it gets more biased and easier for domestic industry to win a decision.”[4]

Yet even though the current trade laws are simply a lynch law for foreign businesses, Congress seems resolved to make them even worse—to create a perfect Star Wars trade law capable of shooting down all incoming imports before American consumers can buy them.

Protectionism has become far less honest in recent years. Instead of openly advocating the sacrificing of U.S. consumers to U.S. corporations and unions, politicians concoct an endless list of purportedly unfair practices used by foreign firms. Instead of proposing to give up economic efficiency and productivity, members of Congress preach the necessity of retaliating against an endless list of domestic policies of foreign governments. Instead of openly proposing to close U.S. ports and borders, members of Congress proclaim the need for a “level playing field”—which translates into allowing the U.S. government to punish whomever it chooses, for whatever reason.

Our trade laws could properly be described as the Foreign Business Excess Profits Program—since the tendency is to require foreign companies to sell their products to Americans at higher prices than they otherwise would and thus to inflate foreign profits (often while reducing foreign sales volume). In the past 10 years, foreign companies have made billions of dollars in extra profits in the United States thanks to U.S. trade restrictions. (Of course, many foreign companies have been denied the chance to make any profit at all and have been forced to sell less than they otherwise would.) Yet if a foreign company allegedly loses 1 percent on its U.S. sales, then the members of Congress become incensed, claiming that the foreign company is trying to destroy its American competitors.

According to the late secretary of commerce Malcolm Baldrige, “Literally, our fair trade laws are the bedrock on which free trade stands.”[5] However, rather than a bedrock, our trade laws are in reality a rigged trap, certain to snare foreigners while leaving domestic companies untouched. For the Commerce Department, the only fair price seems to be a price higher than that charged by American competitors.

Before we allow Congress to crucify American consumers on a cross of “fairness,” we should understand the convoluted, contradictory, and perverse idea of fairness that Congress is championing.

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James Bovard, an associate policy analyst for the Cato Institute, has written on trade policy for the New York Times and the Wall Street Journal.