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Terrible Trade Policy, Dumber Defense

December 10, 2013 Leave a comment

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You’d have a hard time finding a worse example of terrible trade policy than what the U.S. does with sugar. The “elaborate system of import quotas, price floors and taxpayer-backed loans ” is blatantly designed to protect domestic sugar producers from foreign competition.

As bad as the policy itself is, at least you would think its defenders could provide a defense of it that didn’t insult the intelligence of anyone with a bit of economics knowledge. For example:

Without the program, the industry says, the U.S. economy would lose tens of thousands of jobs and become dependent on foreign sources to meet the nation’s sugar needs.

Really?

(1) would lose tens of thousands of jobs Like, the same way you lose your keys and can’t find them again? These sugar growers will do what? Sit around watching TV for the rest of their lives? They really can’t do anything else besides grow sugar? Is growing sugar such an amazingly low skilled job that its labor couldn’t do any other kinds of work?

(2) become dependent on foreign sources to meet the nation’s sugar needs Shocking! What a disgrace to import foreign sugar! And of course, once a country imports foreign sugar, if the foreign stuff ever runs out or becomes more expensive, there’s no way it could be ever grown again, right? It’s amazing to think that anyone could lose a moment’s sleep over “foreign sugar dependence.”

Why not just make an honest case?

“Eliminating these subsidies will cause a short-term labor disruption. Some people in the sugar industry will be jobless during that transition. Foreign sugar is much cheaper, so we won’t see it produced in the U.S. anymore. We think it would be better to have everyone in the U.S. pay more for sugar and keep this industry alive domestically. We don’t really care that this makes us all a little poorer, and takes away an opportunity for someone in another country to produce something they are really more efficient at producing than we are, because they are foreigners.”

It’s an ugly, mean-spirited and pessimistic case for the sugar producers’ protection, but at least we could respect the honesty behind such a defense. Something tells me, we’ll never hear anything like that.

 

Binding Price Ceilings on Ceilings

December 2, 2013 Leave a comment

Venezuela’s President Nicholas Maduro just can’t resist:

Maduro also announced on Friday a new decree to limit monthly rents for commercial properties, to 250 bolivars ($40) per square meter, in a bid to reduce costs passed to consumers.

Usually price ceilings are put in place to protect consumers with low purchasing power. When you put a price ceiling in place to protect producers–notice that this ceiling is on commercial rents, not housing–something is spinning out of control.

Politically, this move is fairly astute, in that new commercial space takes a long time to build, so the shortage this will create will not be apparent immediately. In fact, it may boost occupancy rates in the near term.

One thing’s for sure…this will tighten the local market for commercial space if it’s enforced. For one thing, renters will demand more space. Also likely: owners of commercial space will simply refuse to rent some of the best spaces at the lower price, forcing renters who want the best space into their inferior facilities.

Owners also now have a lot less incentive to maintain properties to get maximum rents. It’s happened before!

16-abandoned-office

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