Thursday, April 12, 2007

A Tax by Any Other Name...

Following tariffs on Chinese coated paper, here's an overview of what it means to American consumers:

Those who applaud the imposition of punitive tariffs on American consumers of Chinese paper products must at least explain why they don't count the higher costs caused by China's still-immature capitalist economy against the allegedly lower costs made possible to paper producers by the government in Beijing. Economic -- if not political -- consistency requires such an explanation.
If you have the time, read the whole thing. The arguments for the tariffs have seemed dubious at best. From Greg Mankiw a few days ago:
Industrial subsidies are bad policy, but they are bad policy for the country paying for the subsidy. The country buying the subsidized goods benefits from cheaper imports. Think of these subsidies as the opposite of OPEC--another country conspires to sell goods below competitive prices. For the same reason that high prices from a cartel hurt us, low prices from a subsidy help us. It is common sense that when you buy something, you would rather pay less than more for it. That is as true for a nation as it is for a household.

The bottom line: The Chinese taxpayers should be complaining about these subsidies, not the American government.
Other than in limited cases of national security, I'm not sure I buy many of the trade protectionist arguments. There's no avoiding the economic reality that a tax on suppliers becomes one on consumers (i.e. the small and large businesses who are the largest consumers and ultimately everyone else who buys from these companies). The arguments that trade is 'unfair' and is 'taking away from American jobs' might elicit sympathy if it weren't for the rock bottom US unemployment rates and growing American prosperity.

No comments: