Home > International Trade, Tax Policy > Who Doesn’t Get Protected?

Who Doesn’t Get Protected?

When a government steps in to impose tariffs to protect a particular industry, like the Alabama catfish industry, why doesn’t anyone counter with moves to protect all the losses that are imposed on catfish consumers and ultimately, the rest of society?

The traditional answer has to do with concentrated benefits and diffuse costs. But what if consumers were more aware of the costs? What if, like ingredient labeling, consumer goods had to bear a label if they were covered by protective trade legislation? “The price of this item is approximately 46% higher than it would otherwise be, because of a law Congress passed to protect the XYZ industry from lower-cost non-domestic sources of supply.”

After all, the proponents of fair trade are pretty confident that what they are doing is “worth it” to society as a whole. They admit they are imposing costs on consumers but say the alternative is harm to a domestic industry. Why not let consumers know so they can feel good about paying the extra amount to protect that industry? Is it because making the diffuse costs explicit would make it easier for the losers to organize themselves? That would be more possible than ever in the age of Facebook, Twitter and Weibo.

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  1. April 1, 2013 at 12:00 am

    The question of who gets protected is one which most if not all leaders have been faced with,and often times the answer has been a rather political one.
    Time and again politicians have had to choose between the ”more aware” minority domestic producers and the ”seemingly unaware” local consumers . As history has it, the ruling has always been in favor of the domestic producers,a more politically acceptable choice. It is this awareness of the domestic producers ,brought about by their understanding of the concentration of benefits and diffusion of cost in their favor(as you mentioned earlier), that instinctively pushes politicians to slam tariffs on foreign competitors’ products.
    But again, this is the traditional argument and one cannot blame the government for having ruled in favor of one side from time immemorial, no one has yet summed all the diffusion costs incurred and pitched a liable argument against tariffs.
    Living in the 21st Century, one coupled with rapid changes and revolutions, the Information age as some might call it, we ought to think outside the box,picturing a scenario where both sides, i.e domestic producers and consumers are equally aware of the benefits and losses of any subsequent government action as regards to tariffs. People do respond to incentives,the strongest and immediate incentive to the domestic consumers would be to boycott the local producer’s products and hence take the government head on.This would set up a much undesired stand off between domestic consumers and producers.
    As the ”Arab awakening” changed the face of public mobilization and organization,where mere tweets and posts on social networks set the ball rolling, one that saw governments topple and once proud dictators brought to their knees, consumers would in this light find it much easier to mobilize,educate and emancipate one another, hence enabling them to pitch their complaint in a manner as organized as that of the domestic producers.
    This would surely create a rather uncomfortable position for the government,an almost impossible decision for the people in power, highly reminiscent of the recent Kenyan Electoral stand off between the two presidential hopefuls in Raila Odinga and Uhuru Kenyatta. Perhaps, like the Kenyan dilemma,we would witness economic revolution where the high court gets to decide on who gets protected and who does not!
    Then it would be up to the integrity and honor of the losing party to accept the decision and either divert their resources into production of other goods in which they have a comparative advantage or ”take one for the team” and go on with paying the 46% in order to protect the local XYZ industry.

  2. Nelson Abraham
    April 9, 2013 at 12:53 am

    [4/1/2013 3:48:20 AM] Nelson Abraham: The Commerce department to protect catfish industry, protects US domestic production and fair value pricing for a sound economy. This decision is a step in the right direction, catfish farming is vital to West Alabama economy, where by 5,800 jobs depend on this sector which account to $ 158 Alabama economy.

    Decision of Commerce Department to use Indonesia as a substitute country to Vietnamese to correct unfair competition might be a good stepping stone but not effective if national trade laws are not enforced. I am puzzled ! why The commerce department had previously been using Bangladeshi data to set the market price for Vietnamese? They were digging their own grave, they have to be accountable for their own actions. This should be a lesson, other domestic production sectors should be well reviewed for ‘fair value’, we should not forget these domestic productions play important roles in country’s GDP. Its the matter of accountability !

  3. Nelson Abraham
    April 9, 2013 at 1:00 am

    [12:51:42 AM] Nelson Abraham: The Commerce department to protect catfish industry, protects US domestic production and fair value pricing for a sound economy. This decision is a step in the right direction, catfish farming is vital to West Alabama economy, where by 5,800 jobs depend on this sector which account to $ 158 Alabama economy. Trade has to make everyone better off !

    Decision of Commerce Department to use Indonesia as a substitute country to Vietnamese to correct unfair competition might be a good steping stone but not effective if national trade laws are not enforced. I am puzzled ! why The commerce department had previously been using Bangladeshi data to set the market price for Vietnamese? Because of Bangladeshi being a poor country ? This was a poor planning strategy, they have to be accountable for their own actions. Other domestic production sectors should be well reviewed for ‘fair value’, domestic productions play important roles in country’s GDP. Its the matter of accountability

    • April 9, 2013 at 8:08 am

      “Trade has to make everyone better off !” But Nelson…don’t you realize that this policy is not making everyone better off?

    • Jeffrey Laryea
      April 20, 2013 at 8:37 pm

      Nelson, what exactly do you mean by “fair value”. Value is a pretty subjective and intrinsic concept, and thus, it being classified as fair or unfair should be left solely in the hands of the consumer. Its a “beauty lies in the eye of the beholder” kind of quandary. Trying to decide this on behalf of the general public could end up as economic suicide. Most decisions taken in such situations would be in favour of the best political outcome and hardly ever the best economic outcome. Protecting an industry would just be another way of forcefully( and i use this word loosely) taking/stealing money from everyone in your country and giving it to your friend in the hopes that he will make something of himself with it. Now i don’t think you’d be willing to do that, would you? In my opinion, industries should not be protected. Chances are, the ones worth protecting at all will be able to tough it out and stand tall when its all said and done.
      The government could rather try to build programs that would help these “losing” industries channel their resources towards ventures that show promise of high productivity.

  4. Leon John
    April 10, 2013 at 8:29 pm

    In my point of view the U.S. government imposed the tariff to protect the Alabama catfish industry as well as the U.S. catfish consumers. Alabama being the second largest producer of catfish after Mississippi, In the last 10 years a sharp decline has been felt among catfish farmers due to unfair foreign pricing. Foreign fish mainly those from Vietnam and China are set at such a low price that its hurts the U.S. catfish industry, the foreign markets can set low prices because they often don’t test for carcinogens or other harmful chemicals in their fish. Because of the unfair pricing U.S. catfish farmers have had to decrease employment in order to keep their business profitable.
    Will Pearce, owner of Pearce Catfish Farms in Marion Junction said in a previous interview with the (Selma Times Journal) that If the catfish industry were to disappear tomorrow, he knows that that part of the state would really suffer, there would be several jobs between suppliers and farmers that would be taken away.
    Also Rick Oates, Alabama Farmers Federation catfish commodity director, said in a previous interview with the Times-Journal that the decision to raise imports costs will directly affect Alabama and U.S. farm raised catfish in a positive way.“Catfish farming is a vital part of the economy in west Alabama,” Oates said. “Approximately 5,800 jobs are dependent on the industry and it contributes $158 million to Alabama’s economy.”
    U.S. catfish consumers can now benefit by getting safe products from U.S. catfish farmers. Also the society is better off because of open employment opportunities in the catfish industry which will unable the society to gain income. The U.S. government also earns income through the imposed tariffs which can be used to build schools, health care centers, public transport in order to improve the living standard of the people.

    • Jeffrey Laryea
      April 20, 2013 at 8:48 pm

      If its a health issue, why not ban the importation of untested catfish completely since its clearly a hazard? That should fix the problem right?

  5. Winlady Bernard
    April 10, 2013 at 10:04 pm

    Domestic production and fair value pricing are essential aspects of a sound economy, This decision is a step in the right direction to protect U.S. workers and U.S. catfish industry.The Commerce Department’s decision to use Indonesia as a surrogate country for Vietnam helps correct unfair competition and ensures that jobs and the industry are protected. By U.S. government enforcing trade laws, and fostering an environment that requires healthy competition, I am confident that the local catfish farms will again be a market leader.
    The quality of fish raised in the U.S. is consistently better and safer than fish not subject to the strict standards. Therefore, when consumers purchase U.S. farm raised fish they are getting a safe product. Unfortunately, with the low number of inspections done on imported fish, quality and safety problems often go undetected and unsafe food can be introduced into the U.S. food chain.
    Rick Oates, Alabama Farmers Federation catfish commodity director, said “When Americans buy U.S. farm raised products, we all win; from the farmer to the consumer and all of the jobs provided in between,”
    So in the question who gets protected i think both the U.S. catfish industry and the catfish consumers are protected.

  6. Diallo
    April 24, 2013 at 12:52 am

    Basing on 6th principle of micro economics ” market is a good way to manage economic activities” and basing on what we have covered so far I think that the government shouldn’t protect any company. If catfish industry can’t survive by themselves in the competitive market that means they do not have comparative advantage on what they are doing so somebody else should take over but by protecting them it lead the market toward a monopoly far way from its market equilibrium and society is not better off. Even though catfish industry is providing a lot of jobs, society will be better off if they do what they have comparative at. But the problem is people always wonder why it usually happen this way ? in my opinion one reason is because some company knows how to pull some strings and get them self protected , for instance the CEO of that company might have a good relationship with someone there in the government so he use that power to get him self protected which I think should be review and stopped because just by doing that the government usually end up by giving the right to produce to someone who shouldn’t and finally society in is worse off

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