The rising flood of imports from Japan, Canada, Taiwan, South Korea and Brazil is causing a big protectionist drive in Congress with more than three hundred trade bills. Pete Du Pont, Chairman of the Hudson Institute and former governor of Delaware analyzes the long-term effects of Protectionism.
This fall, protectionism--the imposition of stiff trade barriers--became a political cause celebre. In the last few weeks, the protectionist fervor has waned considerably, thanks to the continuing strength of the United States economy and to President Reagan's courageous efforts to resist policies that would undermine America's prosperity and growth. But we can be sure the protectionist rhetoric will return next year, as Democrats have pledged to make the alleged need for protectionism a major issue in the 1986 congressional campaigns. Perhaps now, in this calmer interim, is a good time to examine the wisdom of such restriction of trade.
To be sure, the driving political forces behind protectionist legislation are understandable. And, undoubtedly, there are very real problems. Some industries and firms are losing their ability to compete in the world market, causing great hardship to some working families. Some exporters are facing illegitimate barriers to the export of their goods and services. Politicians are right to wish to help change this situation.
But protectionism is not the answer. Indeed, it would worsen the very problems it promises to fix. But the call for protectionism will become less shrill only when an alternative set of policies is put forward; policies that will create new jobs while recognizing the special problems of the dislocated worker, increase our competitiveness here and abroad and restore America's leadership in the world economy.
The Costs of Protectionism
The costs of protectionist policies do not appear in black and white in the federal budget. The cost imposed on consumers is not visible like a sales tax receipt. But the cost is real. And it is high.
Economist Michael Munger has calculated that in 1980 the total cost of existing import restrictions was $58.5 billion. Since then, new barriers have come into being, and today, the cost of protectionism comes to between $1,500 and $2,000 annually for a family of four. This, of course, is more than most families pay in federal income tax.
Quotas on automobiles alone have increased the cost of imported cars by $1,400 and the price of domestic cars by more than $600. As a result of already existing protectionism, in 1984 American consumers paid an additional $4.5 billion for automobiles, $1 billion for footwear, $3 billion for sugar, $18.4 billion for apparel and textiles, and between $1.5 and $4.9 billion for cheese, butter, milk, and cream.
Economists at the Brookings Institution and at the council of Economic Advisors have calculated the tremendous cost of using tariffs and quotas as an industrial policy. For instance, "protecting one job in the footwear industry, where the average wage is $10,300 per year, costs more than $68,000. And protectionism in the automobile industry costs an average of $160,000 to protect an average salary of $28,300. Thus,
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