Friday, February 24, 2017

Tire Tariffs and Jobs

You could have a big dipper
Going up and down around the bends
You could have a bumper car, bumping
This amusement never ends
--Peter Gabriel

President Trump's loud protectionist rhetoric may be crowding out memory about interventionary trade policies of his predecessors. The fact is that no president in the past 100+ years has operated in the White House as a totally free trader (Coolidge was probably closest to the ideal). All had protectionist policies, sometimes huge ones, en force.

Going back further to the Party of Lincoln and beyond, protectionism has been a central political plank nearly since the country's founding.

Prof Williams takes us back to the early days of the Obama Administration's initiative to protect jobs in the domestic tire industry. Beginning in 2009, the administration oversaw the imposition and enforcement of various tariffs and taxes on tire imports, particularly those from China. When it couldn't realize adequate relief via the WTO, China retaliated with trade sanctions of its own.

In his 2012 State of the Union speech, Obama boasted that his administration's policies were responsible for saving over 1,000 tire industry jobs. However, this situation is a classic case of that which is seen and that which is not seen.

A subsequent study sought to evaluate the total cost of the tire industry protection program. The researchers concluded that tire trade restrictions forced Americans to pay about $1.1 billion more for tires. Moreover, each of those tire industry jobs, with average salary of about $40k/yr, would up costing about $900,000 per job saved. That's an ROI that only a bureaucrat would love.

Protectionism is always and everywhere a failed strategy. What people often see in support of protectionism are highlights of the few jobs saved. What they don't see are higher resulting product costs and the many jobs in other industries eliminated as a result.

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