trade war

Fishy Politics May Harm US Consumers

by Greg Conko on July 14, 2009 · 2 comments

in Agriculture, International, Natural Resources, Regulation, Trade

The Wall Street Journal has a great editorial today on one US industry’s latest attempt to secure some protection against foreign imports, which just may spark a trade war with an important target for American exports. This time, it’s the farmed fish industry, and the imports in question are catfish from Vietnam.

The U.S. catfish farming industry, located primarily in Alabama, Arkansas, and Mississippi, faces tough competition from Vietnamese imports, the value of which rose from $2 million in 1998 to $46 million in 2002, and $77 million last year, all the while chipping in on the US-produced market which fell from about fell from $488 million to $410 million during the same time period. That didn’t sit well with American fish farmers. So, in 2002, they convinced Congress pass a law forbidding Vietnamese catfish, which is a different species than the one farmed domestically, from being labeled as “catfish.” Instead, you’ll see it in supermarkets labeled as “basa” or “tra,” even though taxonomically, the Vietnamese fish are members of the family Pangasiidae within the order Siluriformes, which makes them genuine, authentic catfish.

American consumers seem to like the relatively inexpensive imports, no matter what they’re called. So, in 2003, the US farmed fish industry secured a punitive tariff of up to 64 percent on the Vietnamese fish. And, last year, the federal Farm Bill included a provision introduced by Republican Senator Thad Cochran (Miss.) that would authorize the federal government to shift the inspection of “catfish” from the Food and Drug Administration, which currently oversees nearly all seafood, to the US Department of Agriculture. According to the Associated Press,

“The inspections requirement could be the U.S. producers’ silver bullet, stopping imports in their tracks. Applying to all catfish sold in the U.S., it would require Vietnam to establish a complicated inspection system and demonstrate that it is equivalent to U.S. inspections, a process that could take years.”

Ironically,

“after years of arguing that the Vietnamese fish is not catfish — and winning a federal law saying as much — the U.S. farmers are now trying to have it both ways. Under their latest lobbying strategy, they want the Vietnamese imports considered catfish so that they will be covered by [the] new inspections regime”.

This is reminiscent of a similar dispute between the European Union and South American fishing industry that arose earlier this decade. In an effort to protect the European fishing industry, the EU adopted a rule that forbade Pacific Ocean-caught Sardinops sagax from being labeled as “sardines” despite their taxanomic similarity to Mediterranean-caught Sardinops walbaum. In 2002, the World Trade Organization found that this violated the EU’s GATT obligations and ruled in favor of the complainant, Peru.  It’s worth noting that the US sided with Peru and the other South American countries in that dispute, but is now doing exactly what it condemned the EU for doing just a decade ago.

The various US attempts to hobble the Vietnamese farmed-catfish industry is no less underhanded. And, in order to prevent a trade war with Vietnam, it would be wise for Agriculture Secretary Tom Vilsack to reject the pleas of US fish farmers to harm US consumers by making it harder for us to enjoy a good, safe, and inexpensive food.

Stimulus Ignites Job-Killing Trade War With Canada

by Hans Bader on May 15, 2009 · 1 comment

in Economy, Employment, Energy, Environment, Global Warming, International, Odds & Ends, Politics as Usual, Stimulus to Nowhere, Trade

The $800 billion stimulus package pushed through by Obama has ignited a trade war with Canada, reports the Washington Post. In response to vague “buy American” provisions in the stimulus, “A number of Ontario towns, with a collective population of nearly 500,000, retaliated with measures effectively barring U.S. companies from their municipal contracts — the first shot in a larger campaign that could shut U.S. companies out of billions of dollars worth of Canadian projects.”

A trade war is also underway with Mexico, thanks to a provision in the stimulus package that blocked a measley 97 Mexican truckers from U.S. roads. That minor NAFTA violation “caused Mexico to retaliate with tariffs on 90 goods affecting $2.4 billion in U.S. trade,” destroying 40,000 American jobs.

Obama’s protectionism echoes Herbert Hoover’s protectionism, which helped spawn the Great Depression. President Hoover signed the Smoot-Hawley tariff, which helped turn a recession into the Great Depression by triggering a trade war with other countries.

Unemployment is now even higher than what Obama predicted it would be without the stimulus. The White House now admits that there will be no job growth until 2010. The Congressional Budget Office repeatedly predicted that the stimulus would shrink the economy “in the long run,” but increase it in the short run, i.e., by the next election.

But so little of the stimulus money has gone into sectors of the economy where unemployment is high (like construction and transportation) that it seems to be doing nothing for the economy even in the short run. The $100 billion it pours into education — a sector where unemployment is very low, and where the U.S. also spends more per capita than almost every other country — appears likely to be wasted. Only 5.9 percent of the stimulus will go to transportation, a small amount compared to the amount of money it showers on state governments, which are using it to continue to provide lucrative pension and health benefits for state employees, whose wages continue to rise much faster than private sector workers.

Obama is following in Herbert Hoover’s footsteps on taxes and spending. In the Great Depression, Hoover raised marginal tax rates to 63%, and went on a deficit spending binge. Similarly, Obama has proposed higher marginal tax rates, which will produce another $1.9 trillion in tax increases. One of Obama’s own advisers now says that “the barrage of tax increases proposed in President Barack Obama’s budget could, if enacted by Congress, kill any chance of an early and sustained recovery.” He compares Obama’s tax increases to those that deepened the Great Depression.

Hoover imposed regressive taxes that burdened consumers, like the Revenue Act of 1932. Obama is now doing the same thing through his proposed $2 trillion cap-and-trade carbon tax. Obama privately admitted to the San Francisco Chronicle (which didn’t report it) that under his “plan of a cap and trade system, electricity rates would necessarily skyrocket.” As Obama admitted, that cost would be directly passed “on to consumers” — just the way Herbert Hoover’s 1932 excise tax increase was. Although the tax’s supporters claim it will cut greenhouse gas emissions, it may perversely increase them and also result in dirtier air. It is also chock full of corporate welfare, regional favoritism, political pay-offs, and give-aways to special interests.

Energy bill — “first shot” in carbon trade war?

by Fran Smith on April 1, 2009 · 2 comments

in Economy, Energy, Environment, Global Warming, International, Trade

In the wake of the release of the Waxman-Markey energy bill, many commenters have pointed to the drastic restrictions on domestic energy use to address greenhouse gas emissions, while some, like CEI, have pointed to the huge economic costs that would result — costs that would be paid for by consumers and in terms of reduced manufacturing and jobs.  Few have noted a further economic consequence — the possible disruption of the world trading system because of the bill’s endorsement of carbon border taxes on imports from countries that don’t have an energy-repressive regime.  Here’s what CEI’s Iain Murray has to say about that:

The bill as drafted clears the way for carbon protectionism.  It envisages “rebates” to companies that have to pay higher costs than their international competitors, which amounts to illegal state aid under WTO rules.  Further, it directs the President to institute what is laughably called a ‘border adjustment’ program requiring foreign companies to pay for the cost of carbon.  This is nothing more than a tariff aimed at eliminating the competitive advantage of other nations.  Taken together, these provisions represent the first shot in what is likely to prove a disastrous carbon trade war.

Margo Thorning of the American Council for Capital Formation and Bill Kovacs of the U.S. Chamber of Commerce provide hard and realistic criticism of carbon border taxes in National Journal’s Experts Blogs this week.

Stimulus Plan Repeats Mistakes That Spawned Great Depression

by Hans Bader on February 3, 2009 · 3 comments

in Bailout Watch, Economy, Labor, Legal, Politics as Usual, Regulation, Stimulus to Nowhere, Trade

The European Union is threatening a trade war over provisions in the $800 billion “stimulus” package backed by Obama and Congressional leaders. The Great Depression resulted partly from the trade war that followed the Smoot-Hawley Tariff signed into law by Herbert Hoover, which Congressional leaders wrongly thought would help end the recession that followed the 1929 stock market collapse.

The stimulus package also contains tons of red tape and strings attached to the money it showers on state governments, in order to benefit big labor unions, like “prevailing wage” mandates that result in taxpayers paying inflated wages for construction projects. Economists have recently described how red-tape misguidedly imposed during the Roosevelt Administration lengthened the Great Depression by as much as seven years.

The “stimulus” package is losing favor among economists and the general public. Only 42 percent of the public supports it, and most independents oppose it, according to pollster Rasmussen Reports. And even economists who once supported the idea of a stimulus (like Martin Feldstein, the pro-bailout economist often cited by Congressional leaders to support bailouts and the need for a “stimulus”) turned against the bloated stimulus package when its pork-filled contents were revealed. Many economists oppose the stimulus package, which is based on economic fallacies.

A similar trillion-dollar stimulus package failed in Japan in the 1990s, producing a decade of economic stagnation known as “The Lost Decade.”