Protectionism and patriotism so often go hand in glove. But the warm glow doesn't last. This is what happened following the application of last year's Section 201 Steel Tariffs:
"Prices increased enough for some importers to pay the 30% additional duties and still sell their products in the US, but in so doing, the differential between US and international prices increased to in excess of $100 per ton for many products. Throughout much of 2002, the burgeoning differential in the US severely hurt steel consumers. More importantly for many, shortages of some steel products disrupted operations. In fact, many steel consumers were simply unable to buy steel at any price, as domestic mills quickly sold out and much foreign steel was simply not offered to the market. While product exemptions made a significant difference to some exporters and steel consumers, it is clear they were insufficient."
David Phelps, President of the American Institute for International Steel addressing the Association of Women in the Metal Industries, Buena Park, CA January 29, 2003
And more fundamentally:
"Several key trade partners launched World Trade Organization challenges. Meanwhile, Europe and Japan have been threatening retaliation against a variety of U.S. exports from key electoral states. On the domestic front, angry steel users have provided evidence of scant supply, rapidly increasing prices, dwindling profits, layoffs and contracts broken by domestic producers seemingly eager to gouge their customers." Dan Ikenson, Cato Institute Sept 2003
What happens internationally is that countries start to retaliate - but smartly, targetting electorally sensitive states who rely on exports. Fiendish.
But what happens domestically is a smack in the teeth to those who believe that the protected companies would respond positively - they simply take the opportunity to gouge more profits from their local market - i.e. fellow Americans.
That's capitalism, folks, and particularly, it is what happens when you reward inefficiency. You see, deep down, these people know they are inefficient, and will make a grab for every dollar while it is being offered, even while knowing in their sleazy little hearts that such blind generosity is undeserved. And because you have given them no incentive to improve, it won't be long before they come back to the table for more. |
