Good points. I appreciate the constructive dialogue. At first I thought about responding to each of your points individually but decided to answer your specific question about tariffs.
Before speaking to tariffs I would like to address your remark about ownership of the “market”. Article 1, Section 8 of the US Constitution clearly gives the Congress of the United States the power to regulate Commerce (i.e. the market) and is very explicit in giving Congress the power to levy taxes, duties, mint coinage, and regulate commerce with foreign nations and between the states. While the Constitution may not explicitly state Congress “owns” the market, it does give Congress the control over Commerce one would normally associate with the “owner” of an enterprise. Now on to tariffs.
Tariffs or user fees should be levied to allocate costs incurred by the taxpayers to the importers and exporters who use the services. This is the most efficient way to keep the taxpayers from subsidizing economic players. One approach would be to add up the dollars spent by the US government to facilitate trade and allocate those costs as a fee on every container of goods entering or leaving the country. The dairy farmer in Iowa who sells his milk locally should not be subsidizing the dredging of a harbor to facilitate Toyota bringing cars into this country. You might say the importer should not subsidize the cost of agricultural services provided by the government to the farmer and I would agree. My response would be to eliminate the Department of Agriculture and all of its services.
If the US government taxes domestic producers and does not tax foreign imports of identical goods and services, it creates an economic advantage for the importer. Tariffs therefore make sense from an economic perspective when they are used to apply the same government applied costs to the same goods. In the case of applying tariffs to equalize taxation penalties, some work is required as taxes are typically levied on income and the government does not have access to the “income” earned by the foreign company on its exports. Due to different competitive conditions, some products earn large margins and other small margins. For this reason I would be reluctant to set the same flat tariff rate for all products. Economists could study product categories and propose tariff levels that take into account imputed profits. When the choice is disadvantaging domestic producers by taxes them and not their foreign competitors, a tariff established based on estimated income is fairer to all players than penalizing the domestic producer. Obviously, if the US government moves to a zero income tax on business, the “tax equity” justification for a tariff would go away.
There are also strategic and self defense issues that come into play. The survival of the nation could be at stake in time of war if domestic sources are not available. For example, it would be suicidal for the Unites States to outsource all of its production of military aircraft and spare parts. There are instances when it makes sense to protect a US industry by applying tariffs to ensure the manufacturing capacity is in place during time of war when foreign supply may be cut off. This is a public policy issue which the Constitution gives Congress the power to decide.
I believe you and I also agree on tariff reciprocity. It is economically harmful to domestic industry if the US applies zero tariff to a product category and its trading partners levy tariffs or non tariff barriers on the same products. In a perfect world there would be such reciprocity. However, it has been my experience that importers cheer the elimination of tariffs but then fight any imposition of penalties when the trading partner penalizes US exports or sells products below manufacturing cost in the US market in a deliberate attempt to put US industry out of business.
I would apply punitive tariffs to countries engaging in currency manipulation to drive down the cost of their exports in the US market and therefore create an unfair price advantage. I would also apply tariffs to offset export subsides given by countries in certain industry. The amount of the tariff would be equal to the subsidy. likewise I would assess tariffs to offset the benefit of currency manipulation by exporters. Finally, I would apply non tariff barriers and quotas in a reciprocal way. If country X requires every single unit in a container imported from the US to be physically inspected upon entry, I would apply that same rule to every unit imported into the US from the other country.
Speaking of intellectual property I would ban all trade with nations who do not respect intellectual property rights. Period.
With respect to tariffs for the purpose of protecting US labor, that is a policy decision for Congress. I don’t have a specific number in mind. I do know that in the 35 years after the Civil War, the US had high tariffs and experienced one of the greatest periods of industrial expansion in the history of the world. Tariffs were much higher in the 1950’s and 1960’s than they are today yet the US economy created an unprecedented amount of new consumer and industrial products, and became the world’s leading economy. The Japanese experienced rapid economic growth in the 1950’s, 1960’s, 1970’s despite high tariff and nontariff barriers. They also became a powerful exporting country despite having a protectionist trade policy with respect to their own country. You indicate history demonstrates the harm of tariffs. There are as many examples of countries thriving with mercantilist or protectionist trade policies. I remain unconvinced some level of tariffs is not actually beneficial to the domestic economy.
OK, it looks like we have reached a couple of points of agreement and that overall we’ll have to agree to disagree.
One thing that I would like to point out is, in my understanding, the regulation of commerce powers granted to
Congress was to be intended to ensure that all states freely traded with each other. It was not a blanket permission slip to regulate ALL commerce.
That said, I’d also disagree with your defining the market as commerce. I don’t consider them as equals...Commerce is economic activity, however it is not the whole of the market. The market, as I described before, is a compilation of millions of individual transactions, so in that sense I do understand your attempt to equate the two. However, if we do accept that premise, and if we accept that congress has the power to “regulate ALL commerce,” then we must accept that our federal government is empowered to regulate all aspects of our lives.
I don’t believe that would have been the founders’ intent and I don’t accept that premise. However, I am no supreme court justice, so what do I know! ;-) Given Obamacare your premise is more applicable in reality right now, I grant you that! However, my unwillingness to accept it is what will drive me to fight such tyrannical intrusions!
Have a great week FRiend.