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When I read the latest report of trade restrictions imposed by Canada on U.S. tomatoes, I got the same nasty feelings. As detailed in the Wall Street Journal, Canada imposed duties as high as 71% on U.S. tomato exports to its country, citing dumping on the part of the United States. In other words, the U.S. couldn't sell it's tomatoes in the U.S. at fair market prices so we sold them to Canadians at bargain prices. Or so the logic goes. The Canadian government determined that U.S. tomatoes "were dumped into Canada at prices that were on average 22% below" the competitive price which U.S. consumers paid. Not a bad deal for Canadian consumers — especially the pizza-loving crowd — until the Canadian government retaliated. But this may not be a classic case of tomato profiling. The timing of this ruling, penalizing both U.S. tomato farmers and Canadian consumers, appeared to be in retaliation for duties imposed on Canadian softwood imported into the U.S. — the U.S. Commerce Department has imposed duties averaging 29% on the $6 billion market for imported Canadian softwood. So, there you have it — a tit for a tat. Now, Canadian manufacturers get the short end of the stick because demand for softwood will decline and prices will rise. Meanwhile U.S. consumers will have to pay up for the higher-priced softwood and for that little product where this wood often ends up: single-family homes. Hello potential homebuyers. This is just what you needed to hear after home prices rose over 8% in 2001. Protectionism, of course, started this whole process going in the first place. In response to our recent foray into levying tariffs on steel imports, the European Union threatened to impose tariffs on up to $2 billion of U.S. exports including textiles and steel (how did textiles get into this argument?). The WSJ now keeps tabs on the budding "steel war." Here are some telling headlines:
Why is this endless trail of tit for tat important? An extract from a recent analysis by Bruce Bartlett helps answer the question: According to economists Joseph Francois and Laura Baughman, a low tariff on steel would impose about $2 billion in additional costs on U.S. consumers. This might save 4,375 jobs that would otherwise be lost to imports. However, the higher costs on steel consumers would likely result in a loss of 36,164 other jobs, for a net loss of 31,789 jobs. They calculate that each job saved in the steel industry will cost the economy $439,485. The first problem, as described above, is the cost of protectionism. In virtually all cases the costs of protectionism exceed the benefits gained. The initial impact penalizes consumers but then there is the retaliatory costs imposed on other industries and consumers who have nothing to do with the trade dispute. So let's follow this one through:
All of these events happen because of one act to protect one favored industry. Are the costs worth the benefits? Politicians back in the 1930s thought it was worth the risk. The result: the Smoot-Hawley tariff and a major contraction in world trade. Let's not make that same mistake twice. A prosperous America can't afford to take part in tomato warfare.
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number of years ago
I was riding through the countryside in upstate New York on my motorcycle
and I noticed a young boy standing a short distance from the roadway.
Upon approaching him, he stealthily launched a large object in my direction.
Fortunately the combination of the object — a large red tomato —
and my helmet prevented me from serious injury. But the shock of the collision
and the debris on my faceguard triggered some rather nasty feelings about
the mischievous farm boy who was bound to become a major league pitcher.
