Here’s a little known fact: One of the reasons the Ford F-Series pickup acquired its perch at the very top of the sales ranks of cars as well as trucks within the United States more than 36 years ago had a lot to do with chicken.
The story: Hoping to fend off a surge of cheap American chicken into West Germany, in 1962 the European Common Market tripled the tariff on the birds to about 13.5 cents a pound. The United States struck back, of course. in which imposed tariffs on brandy, a favorite French export, as well as dextrin as well as potato starch to hit the Dutch.
To take aim at West Germany, as well as please its friends within the United Automobile Workers union, in which clobbered the commercial Volkswagen bus having a 25 percent levy on light trucks.
Though the different retaliatory tariffs were lifted long ago, the chicken tax on light trucks — much higher than the typical 2.5 percent tariff on cars — remains in place. in which is actually not a coincidence in which light trucks account for 82 percent of the vehicles sold by the three big Detroit automakers.
The smell of a trade spat is actually back within the air. Since President Trump announced last week in which he could impose tariffs on foreign steel as well as aluminum within the name of national security, pundits have been fretting about what different countries might do to the United States in return. Could in which be the start of a free-for-all, tit-for-tat commercial conflagration in which could put an abrupt halt to worldwide economic growth?
in which is actually, of course, a possibility. although in which is actually not the only risk. The brand-new tariffs will inflict damage on the American economy even absent retaliation via abroad. If history is actually any guide, Mr. Trump is actually proposing to protect the homeland by shooting in which within the foot.
The closest parallel is actually the moment in 2002 when President George W. Bush decided in which, for the umpteenth time, domestic steel makers deserved a hand as well as imposed tariffs of 8 to 30 percent on a variety of steel products via many countries.
Imports via the affected countries plummeted, of course. although others — in steel categories not covered by the safeguard as well as via excluded countries protected by preferential deals — surged. Overall steel imports increased 3 percent over the next 12 months. Employment within the American steel industry kept declining. as well as according to one study, by the time the tariffs were lifted in 2003, higher steel prices had cost 0,000 jobs in steel-using companies, more than all the jobs within the steel industry itself.
Undeterred, President Barack Obama did roughly the same thing. After complaints about surging imports, he put tariffs on Chinese tires. Presumably nobody told him in which American tire makers no longer produced the kind of low-grade tires exported by the Chinese. In any event, imports via different countries jumped 20 percent after the tariff was imposed. as well as the cost of all imported tires rose by 18 percent, on average.
Gary Clyde Hufbauer as well as Sean Lowry at the Peterson Institute for International Economics calculated the additional cost to consumers at $1.1 billion — or about $900,000 per tire job saved. although the wages of workers whose jobs were saved amounted to about 5 percent of in which.
The lesson is actually not in which protectionism is actually porous. in which is actually. as well as in which can be gamed. Until a few years ago, Ford attached rear seats as well as rear windows to the Transit Connect vans in which imported via its plant in Turkey. Once they had gone through customs — paying the 2.5 percent tariff on passenger vehicles instead of the heftier 25 percent levied on commercial vans — the seats as well as windows were ripped out as well as recycled.
The critical takeaway is actually in which the distortions brought about by trade barriers impose a cost on the economy. in which might not be easy to spot before the fact, although in which tends to be more substantial than whatever fleeting gains protectionism can bring about to the protected.
Think of the multifiber agreement, which until its demise at the end of 2004 allowed the United States to impose individual quotas on thousands of pieces of apparel — cotton diapers via China, trousers via Guatemala. The rationale was to protect one of the lowest-wage industries within the country via lower wages within the developing world. A study by the United States International Trade Commission cited by the Dartmouth economist Douglas A. Irwin in his 2002 book, “Free Trade Under Fire,” concluded in which in which had raised apparel prices by 18 to 24 percent, imposing a particular burden on poor households.
Sometimes the cost can squelch an industry. A 63 percent tariff on advanced flat-panel screens for laptop computers in 1991 helped drive a stake through the heart of the American laptop industry itself. Japan’s Toshiba stopped doing laptops within the United States. Apple moved production to Ireland. An IBM spokesman called the decision “an eviction notice via the U.S. government to the fastest-growing part of the U.S. computer industry.”
Similarly, the ring of protection around the sugar industry almost killed in which instead. Hoping to protect a cost floor for sugar of 16.75 cents a pound even as world prices sank, within the 1980s Washington resorted to increasingly stringent import quotas in which drove domestic sugar prices up to all 5 times the planet average.
Clever Canadian firms sent sugary cake mixes to the United States — where the sugar was extracted. different countries grabbed on to the tactic. In 1985, Washington put emergency quotas on all imports of sweetened cocoa, cake mixes as well as edible preparations. South Korean noodles — with 0.002 percent sugar content — were snagged within the dragnet. So was kosher pizza via Israel.
Then the unthinkable happened: Coke as well as Pepsi decided to replace expensive sugar with much cheaper high-fructose corn syrup. via 1980 to 1987, the share of sugar in American sweetener consumption, previously 65 percent, dropped to 47 percent.
“within the longer term, in which market reaction to the sugar program may indeed threaten the economic viability of the entire sugar industry within the United States,” the economist Anne O. Krueger noted in an analysis of the sugar supports.
Sugar quotas are still around, nonetheless. Candy makers including Hershey as well as Ferrara have moved factories offshore. In 2006, the International Trade Administration concluded in which for each sugar growing as well as harvesting job saved between 1997 as well as 2002, three confectionary manufacturing jobs were lost.
Sugar quotas even undermined American policy to counter narcotics trafficking. The Central Intelligence Agency concluded in which falling sugar exports encouraged farmers in Jamaica as well as Belize to switch to marijuana.
Mr. Trump might look back fondly at in which long-ago chicken tax. within the 1980s, Detroit did everything in which could to fend off Japanese automakers. in which persuaded the Reagan administration to force the Japanese into “voluntary” export restraints on cars — raising car prices for American consumers.
Nothing was as successful as the chicken wall. in which eroded over time. S.U.V.s were ultimately allowed into the United States as cars. Japanese automakers started off doing monster pickups as well as S.U.V.s within the United States, too. Still, fewer than a quarter of cars sold within the United States are made in America. The share for light trucks is actually 54 percent.
although there was a cost: more expensive pickup trucks, for starters, not to mention the discarded seats as well as windows via Ford’s Transit Connects. The tariff also successfully kept smaller, low-margin trucks via competing with the less-efficient versions made at home. Alongside low gasoline prices as well as easy fuel-economy standards, Detroit’s love affair with trucks arguably gave the United States the least fuel-efficient fleet within the industrial world.
If gasoline prices were to rise — say, in an effort to combat climate change — a gas-guzzling domestic auto industry could prove a weak link within the nation’s security.