U.S. Protectionism Stymies Efforts to Expand World Trade

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As U.S. diplomats convene on the World Trade Organization’s November 30 summit, they surely will bring stirring free‐​trade rhetoric to Seattle. If only they meant it.

America is unparalleled in praising the open exchange of goods and services. On October 19, for instance, Trade Representative Charlene Barshefsky told the Council on Foreign Relations: “To turn our back on open trade would be to accept a lower standard of living, loss of export opportunities, reduced rates of investment in plants and hiring, and ultimately a loss of national strength and influence worldwide.”

“Trade has divided Americans for too long,” President Clinton declared in his January 19 State of the Union address. “We must find the common ground on which business, workers, environmentalists, farmers and government can stand together. We must tear down barriers, open markets and expand trade.”

Not even Adam Smith could preach the free‐​trade gospel with the passion and conviction of most federal officials. But Jimmy Swaggart was a pretty good preacher, too. Just as the televangelist demolished his credibility by cavorting with prostitute Debra Murphee, when it comes to free trade, Uncle Sam also has his pants wrapped around his ankles.

Washington complains appropriately about protectionist measures that impede U.S. exports. Meanwhile, outside the spotlight, federal politicians and bureaucrats work hard to keep foreign goods and services from reaching American consumers.

U.S. officials would have more success opening markets if not for America’s own protectionism. Consider just a few items that languish on our docks.

Last July 22, the U.S. government slapped enormous tariffs on lamb from Australia and New Zealand. The previous 0.15 cents‐​per‐​pound import tax skyrocketed to 9 percent of value, up to 31,851 metric tons (about 70.2 million pounds). Above that, a 40 percent tariff applies. Both tariff rates will decline through 2003. When New Zealand’s Prime Minister Jenny Shipley told President Clinton she planned to file a WTO complaint against this naked act of protectionism, Clinton cockily replied: “If I were in your position, that’s exactly what I’d do.”

In a Cato Institute study, Stuart Anderson explores America’s peanut program. Next year’s peanut import quota will rise to 7 percent of domestic consumption. Beyond that, imports will face tariffs of 151 percent above market value. This nonsense adds 40 cents to a 16‐​ounce jar of peanut butter. Allowing Americans to buy peanuts freely would save consumers some $92 million annually.

America also uses non‐​tariff barriers to block imports. According to the European Commission’s October 1998 “Report on United States Barriers to Trade and Investment,” importers of garments with outer shells made of multiple materials “must give the relative weight, percentage values and surface area of each component; for outer shell components which are blends of different materials, it is also necessary to include the relative weights of each component material.”

Uncle Sam is hostile to foreign services as well. For example, overseas entities may own, at most, 25 percent of a U.S. broadcast asset. If Disney wanted to sell ABC to Sony, it could not. In 1912, on the eve of World War I, Washington feared that foreign powers might purchase U.S. radio stations and sabotage them. Today, these rules are as timely as a Model T.

What if Slobodan Milosevic bought ABC? So what? The First Amendment would permit him to air non‐​stop Serb propaganda. Commentators on CBS, NBC, the Fox News Channel and even Comedy Central could refute and ridicule Slobbo’s every word. America would survive.

The 1920 Jones Act forbids non-U.S. ships from hauling cargo between American ports. If, say, a Korean freighter could move bulldozers more economically from San Diego to Honolulu, they must travel instead on a U.S. vessel. The International Trade Commission says sinking the Jones Act could slash shipping prices by 26 percent.

While U.S. airlines may transport anyone from, say, New York to Chicago, foreign carriers may not accept travelers between American airports. Instead, a British Airways 747 flying London passengers to Gotham and the Windy City may not fill empty seats on that final domestic leg.

“The Japanese fight like crazy to keep their market closed because they cannot get into the U.S. market,” says George Mason University public policy professor Kenneth Button. “If JAL could fly from Tokyo to San Francisco, pick up passengers and fly on to Los Angeles, that argument goes away.”

With clean hands, American officials more easily could pry open overseas markets for U.S. exports. America’s trade negotiators in Seattle better keep their soap and hot water at the ready.

Deroy Murdock

New York commentator Deroy Murdock is a Senior Fellow with the Atlas Economic Research Foundation in Fairfax, Virginia, and a member of the Cato Institute Advisory Board on Social Security Privatization.