The uproar over President Trump’s steel and aluminum tariff pronouncements has been a déjà vu moment for me. Early on in the Jimmy Carter administration, I was an economist for the U.S. Department of Labor and a member of the administration's “Footwear Task Force” committee. The committee was implicitly charged with honoring Carter’s campaign promise to grant import relief to American shoe producers.
Protectionists Don't Care about Consumers
Gerald Ford’s preceding administration had rejected import relief for American shoe producers. Ford’s Secretary of the Treasury, William Simon, a person with free market inclinations, had become involved in spearheading the rejection. But Ford had just lost the 1976 election to Carter, so the tone of the Task Force’s meetings was politically charged.
The tone of the committee meetings was decidedly protectionist.
As an aside, I was always amused that a collection of bureaucrats who were about to fleece American shoe consumers should be called a “Task Force.” What a misnomer. My image of a task force has always been the sight of all the Navy ships off the coast of France as D-day dawned.
The tone of the committee meetings was decidedly protectionist. Never, not even once, did we hear from shoe consumer interests (are you reading this, Ralph Nader?). As the process was winding down, I asked the committee when we were going to hear from consumer interests. The third person in the chain of command of the president’s Special Trade Representative looked at me and said: "Van Cott, when are you going to realize that you're out of sync here? We don't give a d*** about U.S. shoe consumers." That silenced any further discussion about American shoe buyers.
Dispersed Losses, Concentrated Benefits
To be fair, organizing shoe consumers as an opposing interest group is not easy. There are millions upon millions of shoe buyers and a relatively small number of producers. Losses to shoe buyers are widely dispersed, while gains to producers are concentrated. Producers have a larger incentive to be politically active on the issue than do consumers.
The whole experience made for a great classroom example of protectionism in action.
Another aside: one of the reasons President Trump has run into such a firestorm with his steel and aluminum tariffs is that there are some concentrated buyer interests. Coca-Cola and Pepsi Cola buy lots of aluminum. Ditto for steel when it comes to General Motors, Whirlpool, and Boeing Aircraft, etc.
Getting back to the “Footwear Task Force,” the committee commenced planning for an around-the-world jaunt to visit shoe-producing countries, ostensibly to "get a handle" on what was going on abroad. The itinerary was Brazil, Argentina, Japan, Taiwan, South Korea, Hong Kong, India, Italy, France, and England. At the conclusion of the trip, the “Task Force” reassembled and recommended the shoe import limitation that had been decided upon prior to the around-the-world trip.
Needless to say, I was not invited on the taxpayer-financed jaunt, but the whole experience made for a great classroom example of protectionism in action over the soon-to-follow 38 years of teaching international economics.
This essay is an expanded version of my letter to the editor of the Wall Street Journal, published March 8, 2018.