Biden Has Embraced Trump’s Protectionism
The Biden administration’s decision this week to raise import duties on some Canadian lumber has US trade policy back in the headlines. Since taking office President Biden has moved to end a pair of trade spats with the European Union, while simultaneously leaving in place the Trump administration’s tariffs on Chinese exports. Despite the wide-ranging applause Biden received for his transatlantic deal making, this freeing up of trade has been an exception to the general trend. Indeed, since taking office Biden has tended to follow his predecessor’s protectionist bent, even while polls show that a majority of Americans still support free trade, though it has suffered a sharp decline of late. While there are several factors to be considered when measuring the benefits of free trade versus protectionism, on the whole, free trade comes out ahead.
First, protectionism always creates one clear loser: consumers. Whether as individuals or as firms, they pay more than a free market would dictate. Consider the results of the four principal tools of protectionism as experienced by consumers. Tariffs, by taxing the incoming import, raise the price paid by consumers for that good. Import quotas cap the amount of a given good that can be imported, protecting the ability of domestic firms to charge higher prices, again, paid by consumers. Export subsidies are tax dollars given to private firms so they can afford to sell their products more cheaply abroad than they do domestically. Lastly, individual or industry subsidies are devoted to encouraging the production of a good or service the government deems desirable—that is, of course, when they aren’t simply being doled out as favors to politically connected favorites.
Indeed, in virtually every instance the motivating impetus for the adoption of protectionist legislation is to be found in a core group of constituents who benefit from it. They are an example of what happens when the benefits of a policy are concentrated while the costs are diffused. A dollar here and a dollar there from every single citizen in the country over the course of years or even decades likely goes unnoticed by them, even though it adds up quickly,
Article from Mises Wire