Economics & Research Blog
Paper Tariff Questions and Comments
I received some correspondence as a result of this week&
By Dr. Joe Webb
Published: May 17, 2007
I received some correspondence as a result of this week's discussion about the paper tariff. One printer sent a link to a response he wrote to the company who helped initiate the tariff action. Both letters are accessible online. Another was a reminder of something that I alluded to, but the note received was more clear.
If component prices increase because of tariffs, it becomes cheaper to import finished product. For example, when steel tariffs came in, steel was imported in the form of finished automobiles... So, to the extent that paper is (relatively) cheaper in China than to import that same paper, it makes Chinese print cheaper to import… So U.S. printers get a double whammy - higher component costs, cheaper imports.
Some of the associations have attempted to be noncommittal by claiming that they are seeking “fair trade” and are working steadfastly for their members to promote that. There is no such concept as “fair” in economics, and restricting the freedom of buyers of goods to purchase the goods they want, or the freedom of suppliers of those goods to make dumb pricing and production decisions, is not good for the marketplace. What those restrictions do is promote the use of alternatives. Business people are kidding themselves if they fall for the “we have no problem competing as long as the competition is fair” mantra. Those same business people love it when they have a hot product that crushes their competition. If that “fair” mindset were to be applied equally, there wouldn’t have been any economic progress for the past centuries. Part of the study of economics is differential advantage, and that's what's at play here; differential advantage is not fair. (A common textbook example is in "we should grow our own coffee in New England rather than in Latin America," when it is obvious that certain weather and other factors are essential to the success of that crop). Business is supposed to be hardball, punctuated by innovation, implementation, and insight, and not shifting of problems and risks to the backs of customers. Printers have written me about the legal aspects of this action. This following article mentions some attorneys involved in the process. It appears that the attorney handling China's response to the imposition of the tariff has a website. I expect that this will be the last time I will be writing about this for a while. There are various negotiations going on between China and the U.S., and a G8 meeting coming up. Like so many things, trade negotiations typically take forever or longer. Right now I would bet on the "or longer" side.