Given our balance of trade, tariffs are a no-brainer - unless you have foreign interests....

[Junkdrawer]

When a country wants to build or rebuild their industries, they enact tariffs to protect their industries from foreign competition.

Now, the usual problem with tariffs is that other countries then enact retaliatory tariffs and exports go down. But we import FAR more than we export. Thus, until our balance of trade becomes more reasonable, tariffs would benefit American workers.

But under the current political state of affairs, tariffs will NEVER happen. Why? Because the multinational corporations that run this country have factories abroad and the tariffs will hurt their bottom line.

For the history buffs, the same thing happened to British workers and farmers in the 19th century. Read up on the British Corn Laws. Once a country becomes an Empire, it's usual for their domestic industries to suffer under the banner of Free Trade. Eventually, they Free Trade themselves into second rate power status and another country takes over as the world leader. But not before a small class of Imperialists become fabulously wealthy. Oh, and the transfer usually involves a World War or two.

And the beat goes on.

[truedelphi]

1. Pauline Maier, who wrote some excellent books about the colonists and

The founders of our country, lets that period of history illustrate the importance of tariffs.

The colonists in the period leading up to the Revolutionary War, TOTALLY understood the notion that without tariffs, the local job base would suffer.

Flood a country with goods from some other locale, and the people in that area will lose their jobs producing those goods.

Ghandi studied the American Revolutionaries' ideas and implemented them in India when he was struggling to help his country free itself from British domination. The reason that he wore that weird little loincloth is that he insisted that people should make sure that they not import anything from abroad - and being no hypocrite, he actually wove the garments he wore. Being as busy as he was, he rarely had the chance to eave an entire outfit!

[Warpy]

5. The main reason for the taxes the colonists found so onerous

were to protect British interests at the expense of American ones. The British knew how vital it was to keep the manufacturing base and mercantile companies based in England so they tried to discourage their development in their colonies.

Tariffs are vital. The dogma of free trade is always a bust for developed nations.

Whether or not we'll rebuild our industry is moot. We need to build some sort of manufacturing base from the ground up or we'll devolve into just one more banana republic shipping raw materials overseas and importing finished goods---a sure recipe to keep this nation poor and weak.

I'm afraid it's as hard to kill a bad idea as it is a good one and nothing dies harder than a bad dogma. However, it's time to push this one aside long enough for us to re establish our manufacturing base because without it, we're finished.

[Hawkowl]

2. No better time

There truly is no better time to re-institute tariffs. We can claim we are building up our nascent "green" industry which will save the world. It also could raise huge revenues which we could use to buy off the middle class with tax cuts. We could even pressure huge corporations with a large, enforced corporate tax rate or tariffs. Before the income tax constitutional amendment, the U.S. government was financed with tariffs. We could also levy a pollution tariff on countries that don't adhere to environmental regulations.

In my opinion, tariffs will be vital in pulling the country out of this Bush Depression.

[depakid]

9. Actually, the Smoot-Hawley Tariff Act of 1930 exacerbated the Great Depression

Trade wars are the last thing the wrld needs at this point- which is not to say that trade agreements don't need to be re-negotiated, or that the WTO hasn't proven to be a counterproductive entity.

[Elwood P Dowd]

10. That is not true.

From Unlawflcombatnt's DU post in November . . . . . .


TARIFFS: The Smoot-Hawley Fairy Tale Updated at 1:33 PM

Edited on Sun Nov-23-08 01:35 PM by unlawflcombatnt
Tariffs:The Smoot-Hawley Tariff Fairy Tale

Once again, it's necessary to debunk the Globalist fairy tales about the "damage" caused by the Smoot-Hawley Tariff. Below is a copy of U.S. GDP from 1929 through 1939. These are official government figures from the US Bureau of Economic Analysis (BLS)
Printable Version of 1929 to 1940

There is a link to a chart below that has key figures highlighted. On that chart, the Trade Balance has been underlined in Red. Exports have been underlined in Blue. Imports have been underlined in Orange.





** Note on the above referenced charts: The 1929 Trade balance is listed as +$0.4 billion. This is a MISTAKE. It should be +$0.3 billion. Subtracting the $5.6 billion in imports from the $5.9 billion in exports gives a difference of +$0.3 billion, not +$0.4 billion.

Notice that there is a slight decline in both exports and imports by the end of 1930. The trade balance remained around 0 during the entire time. Exports bottomed in 1932 — 2 years before any revision or modification of Smoot-Hawley occurred.


The Smoot-Hawley Tariff was signed into law on June 17, 1930, and raised U.S. tariffs on over 20,000 imported goods. Legislation was passed in 1934 that weakened the effect of the Smoot-Hawley Tariff. In effect, the 1934 legislation functionally repealed Smoot-Hawley. Thus, the effects of Smoot-Hawley cover only the period between June 17, 1930, and 1934. This is the time frame that should be focused on.

So in reviewing the chart, what evidence is there that the Smoot-Hawley Tariff "hurt" the economy?? Is there any evidence at all?

No, there is practically NO evidence that Smoot-Hawley hurt our economy.

The US was already in a Depression when Smoot-Hawley was enacted. Prior to Smoot-Hawley, the 1929 Trade Surplus was +0.38% of our GDP. In other words, it contributed less than 1/200th to our economy.

What happens if we focus on exports alone? Exports were $5.9 billion in 1929, and had declined to $2.0 billion in 1933, for a -$3.9 billion decline. This $3.9 billion decline was roughly 3.8% of our 1929 GDP, which had already declined by a whopping -46% over the same period of time. Thus, of the -46% GDP decline, only -3.8% of it was due to a fall in exports.

But the effects on trade must also include the reduction in Imports, which ADDS to GDP. (A decline in imports increases GDP). If the import decline is added back to the GDP total (to measure the net trade balance), the "loss" becomes only -$0.2 billion from our GDP — or less than 1⁄2 of 1% of the total GDP decline.

In other words, the document-able "loss" from the Smoot-Hawley Tariff — the "net export" loss — contributed less than 1⁄2 of 1% of our our -46% GDP decline. Overall, the Smoot-Hawley Tariff caused almost 0 damage to our economy during the Depression.

To put this in better perspective, let's compare all the GDP components together:

1929 .......................................................... 1933

GDP $103.6 billion--------------------->$56.4 billion ( decreased -$47.2 billion)
Consum. Expend $77.4 bil-------------> $45.9 billion ( decreased -$31.5 bill)
Private Invest $16.5 bil----------------> $1.7 billion ( decreased -$14.8 billion)
*Trade Balance +$0.3 bil-------------->+$0.1 billion ( decreased -$0.2 billion)
Exports $5.9 billion--------------------> $2.0 billion ( decreased -$3.9 billion)
Imports $5.6 billion--------------------> $1.9 billion ( decreased -$3.7 billion)

Again, to re-emphasize, how much difference to US GDP did the export loss make? The Trade Balance worsened by only -$0.2 billion, or about -0.19% of our 1929 GDP ( or less than 1/5th of 1% of 1929 GDP). Meanwhile, our total GDP decreased a whopping -45.5% (or -$47.2 billion).

How much effect did a 1/5th of 1% loss of GDP have on the Great Depression, especially when spread over a 4-year period?

Again, where's all the "damage" that the Smoot-Hawley Tariff caused?? (Was it was all in "off-balance sheet" accounts?)

From the actual statistics, the true "harm" caused by the Smoot-Hawley is completely fictional. The harmful effects exist only in the minds of self-serving Globalist propagandists, who hope no one will actually check the facts, and expose their disingenuous attempts to re-write history.

Based on available statistics, Smoot-Hawley had almost NO effect on the Great Depression. At the very most, caused a -3.8% decline in GDP from loss of exports. But factoring in the GDP increase from a decline in imports, it caused less than 1% of the GDP decline.

The Smoot-Hawley Tariff did not cause the Great Depression, nor did it worsen it or extend it. Claims to the contrary are not only false, but easily refutable. The evidence to disprove those claims is abundant, overwhelming, and freely available to the public.

The Smoot-Hawley myth needs to be put to rest, once and for all. The claim that it worsened the Great Depression is nothing but a fairy tale.

[Hawkowl]

11. That has been debunked

The Smoot-Hawley act argument has well been debunked. There have been several posts on DU alone on this very subject recently. Aside from that, there already is a trade war being fought, and we the people, people worldwide are losing. Americans consume 70% of the worlds goods so we approach any trade negotiations from a massive position of strength. We can always go elsewhere to buy our Walmart crap, but where are they going to go to sell it? Tariffs have there place and are a proven remedy.

[depakid]

15. If you think that tariffs and trade disputes will help to revive the world's economies

you are mistaken.

Obviously, NAFTA and the WTO need to be revised- but not, how should we put it- by using an axe when we need to be using a scalpel.

[Hawkowl]

25. Whatever.

[MazeRat7]

3. Not sure its a no-brainer ....

Since what little of our mfg base is left tends to thrive when the dollar is low (compared to other currencies) are they are very dependent on exports. Caterpillar is the first that comes to mind. As are other large capitol goods manufacturers.

Second is the entire "high-tech" industry. I work for a small startup selling some very specialized data center gear. Tariffs against all the components we must import (basically all the silicon), would kill the company. Granted, the assembly is still done here in the US, but not the components. Those all come from overseas even though many of them are designed here in the US.

All that being said, I agree something needs to shake loose to mitigate the huge trade imbalance we have with respect to other nations.

Peace,
MZr7

[mrreowwr_kittty]

6. Why would silicon have a tariff? Is it in the form of a finished product?

Do you import raw silicon or wafers? Because if it's the latter, aren't there companies that manufacture silicon products here?

[MazeRat7]

8. Unfortunately no...

The majors (Intel, AMD, etc) have foundries overseas that do most of the production work. Yes they do make "limited" runs of product here in the states, but not nearly as much as they did when I worked for AMD in the mid '90's. Every chip we use comes from a US foundry somewhere in Asia. The majors mostly do "development" or "prototype" silicon here in the states. Large production jobs they send to their foundry, provided it has the "process" and "geometry" needed for the run.

Another thing I have, regretfully, been part of is finding ways for a corporation to avoid US taxes on goods sold in the US. They do this by setting up "shell" operations overseas, that buy all the raw material and ultimately their product "overseas", and then sell it back to the US "office" at a very marked up price. Adding a tariff there would require the US "office" to absorb the cost which would get passed directly to the consumer.

Bottom line, its a mess. We (the US) need to have something of value, other than "entertainment", that the world markets are willing to purchase. I don't know what that is. I do know we need to get rid of the huge trade imbalance.

Hope that helped...ask more if not. I'm doing nothing but writing code on the weekend trying to keep my job.
Peace,
MZr7

edit: typo

[AntiFascist]

12. What about reducing export tariffs?

There are high-tech products that could be exported to Europe, but this is all the more difficult due to the high tariffs imposed on export. Could these be negotiated down through some trade negotiation?

[Elwood P Dowd]

13. The tariffs are often low, but it is the VAT that hurts our exports.

Many of our trading partners have Value Added Taxes of up to 30% on American goods, while their own domestic companies receive government subsidies. Add in freight costs and distributer markups, and it's impossible to sell many American products to our trading partners. It's basically one-way trade with them.

[MazeRat7]

17. There in lies the rub....

Is there any likelihood we will see something in the next several years that will directly address most of what is wrong with our current trade policy? Furthermore, will we as a nation come to understand that we need to sell more into the global markets than we consume?

There is no way to eliminate our trade deficit unless we increase jobs, reduce consumption, and provide "things" the world actually is willing to buy.

So to your statement: "it's impossible to sell many American products to our trading partners."... How do we make it possible ? It certainly needs to happen, sooner rather than later.
Where are the "good" ideas on how to get there ?

Peace,
MZr7

[MazeRat7]

14. I'm not sure I understand the question...

I've never heard of a US "export tariff". I've dealt with "export restrictions" as in the countries we (the US) can not sell to under law. So I'm not sure what your talking about.
I am by no means a "trade expert", just a senior software engineer that knows the inner workings (dirty laundry) of two very large high-tech corporations.

That being said, US companies that "export" goods (often capital goods), do great when the dollar value is low compared to other currencies. The only relationship I see to "import" tariffs is a relictance of foriegn countries to do business with us. Of course, if they need "it" bad enough, they will. So that argurment really doesn't have any validity.

Peace,
MZr7

[AntiFascist]

18. I guess I was referring to the VAT, mentioned in post 13 above...

I have a friend who would like to sell his assembled-in-America product to Great Britain, but the VAT amounts to something like 30% which could make it cost prohibitive to potential customers. These exports could mean additional assembly work, board production, component sales, all benefitting the American economy not to mention additional employee hiring, and US income tax revenues.

[MazeRat7]

19. Ok, now we are on the same page...

The VAT is something I know all too well. You see in a previous life I helped design the software that would let global corporations avoid VAT in addition to the US taxes on "profit" realized from sales of that product locally. The really big guys simply open a mfg. center and route orders. Now, the products are "produced" in Europe, Asia, Africa, the VAT is avoided. Then, all you have to do is find a way to setup a "global entity" and you can "buy" your own product from them thus allowing the profits to be routed to an off-shore holding company which "IS" the US corporation.

editorial note: This is why I work for a startup today. I thought when I bailed after a few months of designing radar systems for fighters to over 20 years of designing large corporate IT systems, I was making a great choice in terms of a "morally respectable occupation". Little did I know it would be the same song, only a different verse.

Peace,
MZr7

edit:typo.

[AntiFascist]

21. I was afraid of that...

so part of globalization involves penalizing high-tech products produced and exported from the US.

Isn't this a case where "Free Trade" agreements (specifically eliminating the VAT) could actually help the American worker and American industry? I think a lot more attention needs to be drawn to this. I can see a VAT being charged that is equivalent to a state sales tax, but 30% is too much!

[MazeRat7]

22. Well sort of... here-in lies my understaning of the VAT....

VAT is a consumption tax as opposed to a sales tax. Technically its called an <http://en.wikipedia.org/wiki/Indirect_tax|Indirect Tax>.

An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products.<2> Examples would be fuel, liquor, and cigarette taxes. An excise duty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately the manufacturer transfers the burden of this duty to the buyer of the car in form of a higher price. Thus, an indirect tax is such which can be shifted or passed on.

...

In the early years of the United States, there was strong opposition to the federal government levying direct taxes. As a result, the government resorted to tariffs, an indirect tax.

So yes, eliminate the VAT and end consumers of "American" products, in theory, should get those products for less. Then there is the question, which products ? What do we have that the world wants other than "entertainment" ?

Peace,
MZr7

[AntiFascist]

23. Entertainment / information....entertainment / information technologies...

it is all converging. Right now many products are designed in the US, but their manufacture is outsourced to China or other slave-wage nations. China has become so wealthy as a result that they practically own us. With advances in robotics, there's no reason that efficient manufacturing can't be done domestically and you would reduce problems involving quality control, transportation of goods, and production delays.

[MazeRat7]

24. Yup...

The #1 impediment to outsourcing manufacturing is "logistical costs". It is exactly that cost that drove the companies I've worked for to open manufacturing operations on foreign soil. Then of course they take it further and devise ways to avoid paying taxes on what they sold back home.

At the end of the day, and I'm taking really large leap here, I think our IP (Intellectual Property) is the only thing we as a country can offer the world right now. In a few decades, given the current state of our education system, I'm not sure that will be true.

On some level I don't mind being a country that exports "ideas" to the rest of the world, but sadly a large percentage or folks in our country aren't able to participate in the effort.

To quote a common phrase around here.. "I think we screwn". ;)

But I haven't given up hope.

Peace,
MZr7

[BelgianMadCow]

4. Oooo I hear you but...one itsy bitsy thing came out of the G20 summit...

"we are not gonna install trade barriers".

Seemed like such a strange thing to come up with, at that time of crisis.

But it isn't, really. Just the big guns saying we want us our globalization and no tariffs will undo that.

[Greyhound]

7. Sadly true. n/t

:kick: & R #5

[robinlynne]

16. Thank-you. It is a (duh) no brainer.

[Waiting For Everyman]

20. Our trade partners have tariffs against us already... double no-brainer.

K&R :kick: