Trade barriers have the greatest impact on the poor

President Bush has shown incredibly poor judgment in trade policy ever since taking office, says Bruce Bartlett. His steel tariffs backfired by costing more jobs in steel-using industries than were saved among producers, and budget-busting agricultural subsidies doomed a multilateral trade agreement. Now he is making the same mistake with new trade restrictions on imports of some Chinese textiles.

A new report ( http://www.cwt.org/learn/CWT Protection Tax Study.pdf) from Consumers for World Trade quantifies the impact of trade barriers on American families, concluding that the cost of protection is quantitatively large and impacts most heavily on those with low incomes.

In the aggregate, both tariffs and quotas add about 6 percent to all the goods bought, but because low-income families buy more of the things that import restrictions affect, they pay more.

Minorities are estimated to pay 6.9 percent more on average and single parent households pay 7.5 percent more.

Every family would get the equivalent of a $238 per year tax cut if all import restrictions were abolished, according to the report.

A recent study ( http://www.ndol.org/ndol_ci.cfm?kaid=108&subid=900010&contentid=250828)
by the Progressive Policy Institute emphasises the disproportionate impact of trade protection on low-income families.

It notes that "tariffs are highest on the goods important to the poor." For example, a tariff of 48 percent is applied to shoes costing $3 or less.

This means that poor people, the ones most likely to buy such shoes, pay $4.79 instead of $3.23, which is what they would sell for without the tariff.

Another problem with trade protection is that it invites retaliation. The day after the U.S. textiles decision, China cancelled a trade mission to the United States that probably would have led to billions of dollars of orders for American goods, says Bartlett.

Source: Bruce Bartlett, Trade Barriers, National Center for Policy Analysis, November 21, 2003.

For more on Tariffs and Trade Barriers http://www.ncpa.org/iss/int/

FMF Policy Bulletin\25 November 2003