Posts Tagged ‘tariffs’

Who Doesn’t Get Protected?

March 28, 2013 9 comments

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.