Economic Vandalism

Probably not a lot of folks on this side of the pond read The Economist, one of Britain's premier news and business magazines. That's a shame. The current issue (September 19th-25th 2009) has an article entitled Economic Vandalism, investigating the potential cause and effects of the President's recently enacted 35% tariff on tires imported from China. The Economist calls this "A protectionist move that is bad politics, bad economics, bad diplomacy and hurts America." How about a few teasers before you click the link to read the entire article?

You can be fairly sure that when a government slips an announcement out at nine o’clock on a Friday night, it is not proud of what it is doing.

In every other way the president’s decision to slap a 35% tariff on imported Chinese tyres looks like a colossal blunder, confirming his critics’ worst fears about the president’s inability to stand up to his party’s special interests and stick to the centre ground he promised to occupy in office.

..no one can seriously imagine that any American tyre-making job will be saved; firms will simply import cheap tyres from other low-cost places like India and Brazil.

The tyre decision needs to be set into the context of a string of ominously protectionist policies which started within weeks of the inauguration with a nasty set of "Buy America" provisions for public-works contracts.

Besides these sins of commission sit the sins of omission: the president has done nothing at all to advance the three free-trade packages that are pending in Congress, with Colombia, Panama and South Korea, three solid American allies who deserve much better.

In a section headed "Dumb and Dumber" are these comments:

Evidence of a weak president being pushed leftward might cause investors to worry whether he will prove similarly feeble when it comes to reining in the vast deficits he is now racking up; and that might spook the buyers of bonds that finance all those deficits. Looming large among these, of course, are the Chinese.

Under the relevant trade laws, Mr Obama had the absolute discretion not to impose the recommended tyre tariffs on the grounds of overall economic interest or national security. Given everything that is at stake, his decision not to exercise it amounts to an act of vandalism.

If you think, "well, that's just one tariff. What harm could that do?" Here's another article, this one in the Wall Street Journal today, that talks about a similar tariff enacted in the early 1960's that still causes problems and significant waste as businesses find ways to get around the onerous tax that are still in place long after the situation that brought it about has been made moot.

"What Were You Thinking?"