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Foreign Affairs
Toughest on the Poor: America’s Flawed Tariff System
By Edward Gresser
Edward Gresser is Director of the Project on Trade and Global Markets at the Progressive Policy Institute.
The Bush administration’s decision last March to impose tariffs of 8-30 percent on steel has been called everything from hypocrisy and stupidity to Machiavellian political brilliance. The reaction has been a remarkable demonstration of the strength of free-trade opinion in the United States – but it has also been a bit puzzling.
The steel tariffs, even if one believes they are bad policy, are just temporary aberrations from the norm; they will be lifted in a couple of years. But for dozens of other products – sneakers, spoons, bicycles, underwear, suitcases, drinking glasses, T-shirts, plates, and more – tariffs of 8-30 percent are neither aberrant nor temporary. In fact, they are normal and permanent parts of U.S. trade policy. Barring a deliberate change in policy, they will never be lifted – and no one seems to care.
The reason is not simply that people care more about steel than about underwear. Rather, it is that the tariff system has become an obscure, little-studied topic. Those who debate trade and globalization view tariff policy as boring and out of date. Career trade negotiators who set tariff rates have little contact with the customs officers who collect the money. Journalists cover political debate and international disputes rather than the functioning of permanent policy. And government officials, aware that tariffs are generally low and raise little money compared to domestic taxes, rarely think about the system as a whole.
But if these groups were to look more closely, they would find a remarkable situation. Tariff policy, without any deliberate intent, has evolved into something astonishingly tough on the poor. Young single mothers buying cheap clothes and shoes now pay tariff rates five to ten times higher than middle-class or rich families pay in elite stores. Very poor countries such as Cambodia or Bangladesh face tariffs 15 times those applied to wealthy nations and oil exporters. Despite this dismal situation, however, fixing the system would be easier than many imagine.
Malign Neglect
The problem arises more from neglect than from malice. No U.S. administration since the 1970s, or perhaps even since John Kennedy’s, has had a specific vision for tariff policy. Regardless of party, administrations have instead seen tariffs as a series of discrete issues that are useful in building domestic support for, and coopting potential opposition to, larger trade agreements.
In past trade negotiations, some domestic interests – manufacturers of semiconductors, chemicals, capital goods, and so on – sought export opportunities by advocating the elimination of overseas trade barriers and were willing to give up tariffs at home in exchange. Other industries – shoes, textiles, cutlery, glassware – feared foreign competition and fought to keep tariffs high. In the three big multilateral trade agreements since 1970 that have focused on manufactured goods – the Tokyo and Uruguay Rounds of the General Agreement on Tariffs and Trade, and the Information Technology Agreement of the World Trade Organization (WTO) – U.S. administrations tried to satisfy . . .