Tariffs and Offsets

There I was … trying to understand the history of Tariffs in the United States.

I am starting to accumulate data for my next book on whether offsets policies (counter-trade, international industrial collaboration, localization – pick a name) are any better or worse than other government policies. I have started with tariff laws. Before I went too far into the current situation, I thought I should get a little history in the topic. Being American, I decided to start with my own country (even though the US doesn’t have an offset policy … a false statement, as the Buy American Act of 1933 is the world’s greatest offset policy of all time and still in force – it just isn’t titled any of the above phrases). I have earmarked the heck out of the book, Clashing Over Commerce, by the eminent economist, Dr. Douglas Irwin. It is a fascinating read.

If I had to sum up the book, tariffs are: occasionally done in secret but always done in the incredibly impenetrable cloud of legislative rule-making; created by special interests; implemented by vote-seeking politicians; and usually harm the consumer they are supposed to help. No transparency, favoritism to niche groups in the economy, little accountability, often demonstrably unbeneficial to large segments of the economy and ultimately the consumer.

So, let us turn to the many complaints about offsets: Lack of transparency [check], targeted beneficiaries [check], difficulty in determining effectiveness and long-term benefits [check], ultimately costs the consumer (i.e., tax-payer) [check]. On the surface, it sounds to me like offsets policies are no better and no worse than government regulations on import tariffs. Plus, they are more fun! Rather than digging through thousands of lines of boring import categories, you get to play with exciting technology transfers, university tie-ups, space flight, and foreign direct investments and contracting.

Conclusion: if you pay your tariff charges regularly, you should perform your offsets obligations equally as regularly. I guess you can still whine about them, as I think ‘tariff’ can be equated to ‘whine’ in the dictionary.

I now need to go dig into someone else’s tariff regime. Probably the EU. That ought to be rich in academic papers, even books, on how incredibly well this cradle of international trade has managed its tariff regimes over the past century or so. A good place to compare, as Europe in general maintains some of the highest levels of offsets required and implements some of the most rigorous offsets programs. Now, if I can just wrangle a pre-publishing fee for a six-month vacation … er … research trip for data collection. Probably not going to happen – remember, I started this book on Friday the 13th ….

Moral: Offsets are more fun; trash all tariffs and replace with extensive offsets requirements! Take that, WTO!