Buttonwood, however, offers another illustration:
If tariffs are such a good economic idea, then why stop at national boundaries? If they make everyone richer, why not have customs posts between New York and New Jersey? Cars entering and leaving the Lincoln tunnel would have to pay, on top of the toll, a surcharge on all the goods they contain. Why not, indeed, make New York and New Jersey self-sufficient in all their needs, making all their own cars, growing all their own food etc?
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So next time you hear some politician or union leader sounding off in favour of protectionism, substitute "New Jersey" jobs for "American" jobs and and "New York" competition for "foreign" competition and see how much sense his statement makes.
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2 comments:
Well, we have the chicken tax on imported pickup trucks. And this absolutely indisputably made the workers in this country who manufactured pickup trucks far better off. Those of us who buy pickup trucks are screwed, but we are a far less concentrated voice - once every five years, one truck, an extra $4000 - it's not so big. The guys whose whole livelihood is based on not having to compete with truck assemblers in Ulsan, or Shenzhen - they care a LOT about maintaining it.
I'm not arguing that you are wrong about the benefits, you are absolutely right. But the benefits are spread thin for buyers, and thick for makers. dave.s.
dave.s.
There's actually a political economy model called the Grossman-Helpman Protection for Sale Model, that argues basically that politicians maximize their own welfare on trade issues.
From their 1994 paper:
When asked why free trade is so often preached and so rarely practiced, most international
economists blame "politics." In
representative democracies, governments shape trade policy in response not only to the concerns of the general electorate, but
also to the pressures applied by special interests. Interest groups participate in the political process in order to influence policy outcomes. Politicians respond to the incentives
they face, trading off the financial and other support that comes from heeding the interest groups' demands against the alienation of voters that may result from the implementation of socially costly policies.
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