Freeman

ARTICLE

Do The Facts Justify A Higher Tarriff Wall?

MAY 01, 1960 by LAWRENCE FERTIG

Mr. Fertig is a columnist on economic affairs, New York World Telegram and Sun and other Scripps-Howard newspapers, in which this column first appeared, February 15, 1960.

The decline of our export trade accompanied by a substantial in­crease in our imports over the past two years is certainly cause for concern.

Two basic reasons for this trend are (1) American high-cost pro­duction which makes American goods noncompetitive in many lines; (2) vigorous competition by European and Japanese plants fi­nanced largely by U.S. money which can often undersell Ameri­can products both here and abroad.

The effects of this tough compe­tition have convinced many people that the solution is to raise our tariffs and prevent admission of foreign merchandise. It has also given ammunition to organized high-tariff advocates. The most curious result of all, however, has been the effect upon those who pro­claim themselves liberals.

A basic tenet of traditional liberalism has always been the gradual elimination of economic barriers among nations, but an AFL-CIO report recently an­nounced that "powerful support developed for a resolution that would reverse the AFL-CIO tradi­tional backing for the U.S. recip­rocal trade policy and request tariffs to curb imports of goods produced in foreign sweat shops." Of course the phrase "sweat shops" here is merely a semantic trick to designate every nation in the world where labor costs are lower. Many self-styled liberals like the AFL-CIO have renounced the basic liberal principle of freer in­ternational trade.

Do the facts justify those who say this country will benefit if we build up a higher tariff wall to exclude foreign merchandise? We do not think so. They make the fundamental error of looking at only one side of the coin. But there are two sides to it—exports as well as imports. Advocates of higher tariffs gloss over the em­ployment to American labor and the profits to American industry derived from the production of goods in this country which are exported to foreign purchasers.

Although last year was not favorable for our foreign trade, we nevertheless had commercial exports of approximately $16 bil­lion of American-produced com­mercial products. If we curtail this activity, what would happen to the jobs and profits resulting from our producing for export? After all, foreigners cannot buy American goods if they do not earn dollars by selling their mer­chandise to us. Japan, for in­stance, which competes keenly with American producers in the United States, was nevertheless the No. 3 buyer of American goods last year. Even in a bad year like 1959 our commercial ex­ports exceeded our merchandise imports by about one billion dol­lars.

Finally, it must be remembered, every dollar saved by an Ameri­can consumer who buys an im­ported product cheaper is a dollar spent for some other necessity manufactured right here. One American manufacturer’s loss be­comes another’s gain—but the consumer and the nation get an advantage. Just how terrible is this situation on balance, and why should believers of freer trade get panicky?

Look at the Record

Let’s get specific and take U.S. exports and imports on finished manufactures, since we hear so much about our disadvantage in this type of trade. In the 12 months ended September, 1959, our exports were $9.2 billion and our imports $4.8 billion, so we had an excess of exports of $4.4 billion. Is this a cause for panic? In every major classification we import some goods while our fac­tories make substantial exports. For instance:

MACHINE TOOLS

 

Exports

$156 million

Imports

30 million

Net Exports

126 million

 

 

AGRICULTURAL EQUIPMENT

Exports

$141 million

Imports

112 million

Net Exports

29 million

 

 

ENGINES AND PARTS

Exports

$232 million

Imports

5 million

Net Exports

227 million

 

 

CONSUMER GOODS

(Excluding foods and textiles)

Exports

$890 million

Imports

876 million

Net Exports

14 million

Now let’s take a classification where we have a lot of trouble: textiles. Even here our export trade is substantial. The figures read:        

TEXTILES

 

Exports

$434 million

Imports

591 million

Net Imports

157 million

 

In steel mill products we have a similar situation. We import more than we export. But our exports are substantial.

STEEL MILL PRODUCTS

Exports

$165 million

Imports

291 million

Net Imports

126 million

 
If we want to wipe out our im­ports, we will have to wipe out our exports which produce jobs and profits. This would not make much sense. Our imports are profitable, as Professor Gottfried Haberler of Harvard recently pointed out. "If factors of production are shifted from the inefficient indus­tries, which can be kept alive only by skyscraper duties, to efficient export industries, real national in­come per head, real wages and salaries will go up." After all, that is the objective of economic policy, to make real income go up.

A case can be made out for in­creased protection where national defense is involved. We may be in dire need of products of cer­tain industries in the future, and we do not want to be left high and dry if a crisis occurs. But this does not mean that we must throw a higher tariff wall around the U.S. and thus lower the real in­come of U.S. workers.

ASSOCIATED ISSUE

May 1960

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