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AMERICAN FREE TRADE

Americans pride ourselves as Free Traders, yet about one fifth of our manufactures are protected and the trend is up. The annual cost to Americans has been estimated as about $450 for every working man and woman in the country.

The list of protected goods ranges from sugar and dairy products, to chemicals, canned tuna and peanuts. Let's look at some examples.

Want to re-tile the bathroom? Tiles carry a 25% tariff, which costs the American consumer more than $100 million a year.

To get US copyright protection, books must be printed and published here. That little regulation raises your reading costs by one half billion dollars every year.

Kids wear sneakers and when they do, you'll pay. Protected rubber footware costs us $230 million a year, I suppose most of it falling on the poor.

When your kid in his expensive sneakers gets home from school, you'll probably give him a glass of milk. The dairy industry spends a lot of money keeping the price of milk high. Prices are fixed by accomodating politicians, and competing dairy imports are kept out.

By the time your kid has added a peanut butter and jelly sandwich to his glass of milk, you are into big money. Protected peanuts cost us an extra $170 million each year. Not all peanuts are kept out. Every man, woman and child in America is allowed to consume 2 imported peanuts each year. Our government has heart. A peanut butter sandwich includes jam. The sugar that makes up half the jam is so heavily protected, it costs twice as much here as it does in Canada. Figure everything made with sugar costs a bundle because of protection.

LET'S LOOK AT SUGAR

Perhaps we should look at sugar. On television, you may have seen the comercial telling us what a great bargain sugar is. Only two cents worth of sugar goes into a chocolate bar. What better bargain can any of us get than sugar. However, we have to take anothe look at this bit of propaganda. First, our minds tell us to compare the 2 cents with a 60 cent bar. We should actually compare it with the basic cost of ingredients back at the chocolate factory. Then compared with a couple of cents worth of chocolate, milk powder, etc., it looms as a large part of the basic cost. However, the best is yet to come. The commercial was not paid for by the sugar people, but by the corn syrup producers. Now, why did they help the sugar industry. Maybe, out of the goodness of their hearts they decided to praise suger. Well, not entirely. They have a great interest in maintaining the high price of sugar, because that makes the higher priced corn syrup a logical alternative. If sugar went to its real market price, a lot less corn syrup would be used. Sorry, it wasn't brotherly love after all.

The price of sugar is important. Each cent increase in the price of sugar raises food bills by $250 to $300 million.

According to a Commerce Dept. study in 1988, the sugar program was costing us $3 billion a year.

The sugar lobby gets this bonanza for only a few hundred thousand dollars a year into the congressional feeding trough.

High priced sugar produces side effects. It becomes worthwhile to import goods with a high sugar content. Some entrepreneurs began importing such things as iced-tea mix heavily larded with sugar (or, perhaps heavily sugared with sugar). They would then sift out the low world-priced sugar and sell it at the high U.S. price. The Reagan free traders were up to this problem.

They brought in an enforcer, probably Chuck Norris, and kept out imports containing sugar, such as croissants, frozen TV dinners, Korean noodles, kosher pizzas, and chocolate covered ants. The Korean noodles were black-balled because they contained a soup base with 0.02% of sugar in it. The Israeli kosher pizzas had 0.005% of sugar. That was enough.

In a moment of weakness, Reagan relented. He specifically exempted cake decorations, imitation seafood, and Pina Colada mix. Again, this is your government at work.

Another side effect was straight smuggling of sugar, One group of 30 companies were caught and fined $16 million for daring to supply Americans with cheap food.

Of course third world peasants who became unemployed because we wouldn't buy their sugar were a problem. They joined communist parties. Well, governments always know what to do. We came up with the 'Quota Offset Program'. This gave free food to countries suffering from our quotas. We dropped some $200 million worth of free food on to their plates. Of course, this wiped out food prices and stopped farmers seeking alternative crops dead in their tracks. You wonder why I call congress clowns?

Also there was retaliation from sugar exporters against our quotas. Brazil cut back its purchases of American grain, the Dominican Republic replaced its sugar fields with corn and wheat fields -- more competition in America's world market.

In places like Minnesota, high priced sugar has driven up farm land costs to a point where unsubsidized soya bean growers can't afford the fields to grow our major export crop.

Of course, anything is worthwhile to make sure that people have jobs. Third world farmers kicked out of the sugar business, unable to grow food because of the free food dumped on them by the Quota Offset Program, turned to other crops. This might be called a full employment program for the Drug Enforcement Agency.

There are about 10,500 sugar farmers enjoying this import protection. The Commerce Dept. calculated that almost 9,000 jobs in food manufacturing had been destroyed by high sugar prices. Brach transferred its 3,000 worker candy factory to Canada where sugar is cheaper. (I wonder why, when sugar is only 2 cents in a candy bar?)

Meantime, 10 sugar refineries with 7,000 jobs have closed in recent years.

When GATT (General Agreement on Trade and Tariffs) cited the U.S. sugar program, Congress knew what to do. It imposed mandatory production controls on each sugar farmer and quota'd corn syrup.

I hope you don't have a sweet tooth.

COMPETITIVE TERROR -- THE JAPANESE PRODUCTION

A final vexing question. How can we possibly compete with Japan? They can make practically everything cheaper and better than we can. Or, almost everything. Yet, in Japan, if you buy a soft drink, it is likely to be a Coke. Coca-Cola owns about 60% of the soft drink market.

And if, in Tokyo, you get a burger with your Coke, it is likely to be a Big Mac. In fast-food in Japan, MacDonald is #2.

For more than quarter century, Polaroid has been in Japan. Every year has been a new sales record.

If you shave in Japan, it will probably be with a Schick razor. Schick has 70% of the Japanese safety razor market.

Braun - or Brown - is tops in electric razors in Japan, Braun is, of course, a German firm - owned by American Gillette.

Fifty percent of all the disposable diapers used by Japanese mothers come from that famous Japanese firm, Procter & Gamble.

And if you answer your Tokyo doorbell to a pretty lady, she will probably tell you in Japanese that 'Avon' is calling. There are some 160,000 Avon ladies ringing doorbells in Japan.

COMPETITIVE TERROR -- AMERICAN PRODUCTION

We don't have to worry about Japan. Americans should tell their inferiority complexes to get lost. American workers are among the most productive in the world. We should remember that the country which excites most fear in the hearts of foreign anti-market capitalists is the United States. People overseas love American goods, because they are good and they are cheap.

Yes, they are cheap. Why do you think the foreign idiots try to keep out American goods? Because they are too shoddy and expensive for people to buy? No, it's because we are too competitive for their monopolies to handle.

There's danger ahead. Perhaps a repeat of the thirties.Back then, both the U.S. and the British Empire used protective tariffs against the Axis countries. The 1930 Smoot-Hawley Tariff and the 1932 Ottawa Agreements successfully prevented Germany, Italy and Japan from earning their keep. The situation was ripe for the maniacs to take over and propel us all into the blood bath of the second world war.

The US lost some 320,000 dead to protect her textile industry from competition. It took 380,000 British dead and another100,000 from the Empire to protect the aging Lancashire cotton mills from Japanese tee-shirts.

In economic terms, was it worth it? Did Smoot-Hawley help our trade position? Well, within two years of Smoot-Hawley, 25 of our trading partners had retaliated against us. Within 3 years, our exports had dropped 60%. These children in Washington, who never read history, are now trying to take us down the same path -- not for philosophical reasons but as quid pro quo for the bribes they get.

And for Britain, the Ottawa Agreements began a course that reduced a mighty free trade alliance covering a quarter of the earth's surface to a tiny socialist island off the coast of Europe. The Germans, Italians and Japanese weren't responsible. It was the protectionists, the 'Buy British' advocates, who brought the country to ruin.

Maybe war is far away, but even as we speak, competing trading blocks are forming. The European Community is full of protectionists. We are gathering North America together. Can the Asians be far behind?

The only course for us is to be radical. To declare ourselves a free-trade zone. To get rid of this web of restriction that ties our hands and feet and strangles our production. We should become unilateral free traders.

Maybe war is still an unlikely event, but remember the dictum of the 19th century free traders: "If goods don't cross the frontiers, armies will".

POSTSCRIPT

The young United States had two things going for it. Free, or very cheap, land -- and a free market. Both these advantages are disappearing.

Can you imagine what conditions would be like if individual states had been given power to impose tariffs? I suggest that now we'd be a bunch of city-states quarelling with one another.

In fact, if the States were able to protect themselves from each other, I suspect none of you would be here listening to me. You'd be out serving the consumer. You'd be at the Arizona border smuggling goods into California.

The protectionists and their puppets, the politicians, are plenty active in those unenlightened foreign places. If we want to maintain our standard of living in the US we'd better not be seduced into mimicking their stupidities.

Be a free trader, cherish and support the American economic system, which is successful not because of protection and restriction, but because it is trying to be free.

Harry Pollard (May, 1992)
Director, The Henry George School of California

SOME UNUSED EXTRAS

Some unused extras! There's a better way. Black and Decker held 20% of the world market in small tools. Let me repeat that. Every fifth small tool in the world was made by Black & Decker. That's not bad for one American firm. The Japanese firm - Makita Electric Works - launched a determined effort to grab their market. Black & Decker's world share dropped to 15%, which still isn't bad. So, they overhauled, consolidated, slimmed down, and came out selling. They got back their 20% share.

Do you think they would have bothered if the the cold wind of competition hadn't licked around their ankles? If they had been featherbedded with tariff protection, they would probably have been content to live on their fat. Or, rather, on our fat.

We can't rely on these privileged people to help. The chairman and Chief Executive of Bethlehem Steel Donald H. Trautlein explained that domestic steel producers lost $6 billion over two years.

My immediate thought was if the business is so bad, he should do what we have to do -- get out of it.

However, Donald had different ideas. In the same speech he reminded us that the major steel companies in the European Economic Community over ten years had managed to lose somewhat more than $25 billion. But! -- that during that 10 years European governments generously gave $25 billion in capital gifts to their steel producers and are ready to give $10 billion more. They lost 25 and they got back 25 -- with more billions to come. I may be overly suspicious, but do you think Donaid was trying to tell us something?

One can almost see him licking his lips in anticipation of an American slushfund of similar proportions. Yet, it seems to me that if steel is such a chancy business, he ought to get out of it - or start up some mini-mills and make some real money.

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