I suspect that Trump is more about changing the terms of trade and carving out a better deal and not so much about lifting the trade drawbridge altogether. With all the hysteria over Trump and tariffs its worth noting that:
“…President George W. Bush imposed tariffs of up to 30% on steel in 2002. They remained in effect for more than a year. And Ronald Reagan restricted imports of steel in 1984, and later imposed a 100% tariff on some Japanese electronic products. Somehow the republic survived.
And it isn’t as though tariffs and import quotas have become extinct. Imported clothing is subject to tariffs averaging 10% to 15%, and we have a domestic sugar beet industry, I believe, only because of quotas on cane sugar from the Caribbean. I haven’t noticed the press agitating to get rid of the tariffs we already have, even though the same economic arguments they now make–newly-discovered in some cases–would apply equally. Nor do I recall the press rushing to condemn Bernie Sanders’ protectionist views during the 2016 campaign.
This is all about President Trump, of course. If Trump came out for a big increase in the minimum wage, the Washington Post would suddenly realize that it would increase unemployment among minority youths.
So let’s see what happens. Let’s see what order President Trump signs next week, and how other nations respond. Let’s see what negotiations Trump enters into with, for example, China. I think it likely that Trump is rattling sabres over tariffs in order to set the stage for improved trade deals or other concessions–in order, for example, to pressure China to start respecting our intellectual property, a huge issue on which the Obama administration was shamefully supine..” On Tariffs, Hold the Hysteria
Dear Jim,
I have been ambivalent on whether tariffs have protected local industries and if reimposing tariffs would bring back secondary industry. The ‘Powerline’ article by Mr Hinderaker argues that tariffs are used as a strategic response against dumping. According to the article tariffs were applied and removed during the period of Presidents Reagan and Bush. Even socialist presidential candidate Mr Bernie Sanders argued for the reintroduction of tariffs.
I would like to make an argument that the presence of tariffs would only postpone the inevitable de-industrialization of Australia rather than preserve the current industry. I present two examples, the domestic electronics industry and the car industry especially the car industry.
First with the electronics industry. My late father, apart from working in the Snowy Mountains worked in the electronics industries. You name them, AWA, EMI and GE. In the shed there were a few thick radio-industry books on radio circuits. Apart from AWA and HMV (EMI) there were countless other brands of radios which were making radios. Their factories were in Ashfield, Alexandria and Annadale. Funnily despite the many brands, the circuits looked almost the same. It asks the question how many ways can you design a superhet receiver. Anyway, despite the presence of tariffs, a lot of the brands fell by the wayside, perhaps with Ferris car radios remaining in the market place in the early 1970s.
Even with the production of TVs, many of the brands of colour TVs were copies of overseas designs: AWA and EMI were based on British designs and the famous Philips K9 was based on a Dutch design. Nothing innovative of Australian design. Even the made in Carringbah Kriesler was a rebadged Philips K9 with a fancy wooden cabinet. The Penrith made Rank Arena consisted of an assembly and wiring up of circuit boards made by NEC Japan and CRT made by RCA Japan. Another brand to disappear were “Admiral” TVs made in Fairford Rd Padstow. They long left Australia before tariffs had its effect. The factory became the new home of “Metters” in the early 1970s.
So much for innovation. On innovation, in the late 1970s as a child I visited the GE factory in Watson Rd Padstow where stereos and TVs were manufactured. I saw their R&D/laboratory room. The room was no larger than an average-sized lounge room with not enough ‘room to swing a cat’ (cat-o-nine tails not the feline variety). There was no one working these rooms not even a blueprint for the next big consumer electronic device. Even with automation in producing circuit boards, do you really think Australia was going to produce the latest widescreen LCD TVs if tariffs were kept. Methinks not.
You could argue that about whether tariffs would have protected the clothing and footwear industry in Australia. If it’s wages were the problem as to the cost of shoes why are customers prepared to pay big after-tax dollars, say several hundred dollars for sporting shoes made in cheap labour countries. If the shoes were made here and sold for several hundred dollars, the manufacturer would still have a healthy profit. If wages are big problem, why are we still paying the same if not more for petrol that was once manufactured at Kurnell, Botany and Clyde? This suggests that price alone is not necessarily a determining factor in making a purchasing decision. For example when Kelvinators and Simpson whitegoods ceased manufacturing in Orange a few years ago, this was over 40 years after tariffs were reduced and wage growth leading up to the closure was stagnant.
It leads to my second point to the demise of the car industry where there was a tariff present at the demise of Holden, Ford and Toyota. That tariff was the luxury car tax for cars over $60000.
I have already discussed elsewhere on Jim’s blog that Holden and Ford left because they weren’t supplying what the market wanted, which was either SUVs or small cars. Holden Commodore sales have fallen from over 100 000 units 20 years ago to less than 27 000. I have also mentioned tToyota could have continued production at Altona and exporting world-wide because they could not get a reliable source of parts suppliers due to the demise of Holden and Ford.
Going back to the luxury tax on cars over $60 000, one could have bought a Calais for $55 000 or a Statesman for $65 000. The cars had all the bells and whistles for a car with the Statesman having the longest wheelbases in the world, especially for those sitting in the back of the car. Similarly, the luxury car tax did not encourage people to purchase the LTD with all the bells and whistles. The LTD ceased production in 2007. We could also ask why haven’t sales of Holden HSV cars continued to compete against say an MB AMG.
In summary, price and tariff protection or luxury car protection did not necessarily protect industry when people’s tastes change. Perhaps the removal of tariffs were a catalyst to the end of industry as we know it rather than keeping the status quo of secondary industry in Australia.
Regards
Anthony of exciting and downtown Belfield.