Study: Even if U.S. Unilaterally Disarms in Trade 'Wars,' American Taxpayers, Consumers Will Win Big

11/20/2003

From: Paul Gessing or Pete Sepp of the National Taxpayers Union Foundation, 703-683-5700

ALEXANDRIA, Va., Nov. 20 -- As trade talks between the U.S. and other Western Hemisphere countries get underway in Miami, a study released today from the non-partisan National Taxpayers Union Foundation (NTUF) provides U.S. negotiators with a timely message: taxpayers and consumers around the world are the real casualties when nations refuse to lower trade barriers, and Americans in particular benefit from trade even when it isn't reciprocal.

"Because protectionist trade policies are so destructive, there is simply no reason for Congress to wait for multilateral negotiations before removing subsidies or tariffs," said NTUF Director of Government Affairs and study author Paul Gessing. "When it comes to the global trade war, unilateral disarmament on America's part is both the politically honorable and economically intelligent thing to do."

Although the overall average U.S. tariff rate of 1.7 percent on imported goods is among the lowest in the world, Gessing says U.S. trade policies still target specific products from certain nations -- harming our citizens as well as others abroad. Among the reasons Gessing cites for his "cease-fire" proposal:

-- By one estimate, U.S. agricultural protectionism (including taxpayer subsidies) cost developing nations more than $8 billion in lost trade revenues. Paradoxically, these subsidy-induced losses in turn leave American taxpayers with a second round of bills to pay -- over $1 billion in food aid each year that is sent to many of these same struggling countries. Ironically, U.S. agriculture is a net exporter of goods, making tariffs (whose rationale is to protect struggling industries) an unnecessary as well as costly exercise.

-- Trade is not only the key to improving developing nations' economies, it is also an essential component in the U.S. economic recovery. According to government statistics, domestic firms with 20 or fewer employees comprise the fastest-growing segment of American exporters -- the very small businesses which are also responsible for most of the overall job creation in the U.S. Roughly 3/4 of U.S. manufacturing growth during the 1990s occurred in trade-intensive industrial sectors like aircraft production, machine tools, and printing equipment.

-- Even as the federal government spends some $300 billion annually on domestic poverty-reduction programs, protectionism toward certain goods like inexpensive apparel, shoes, and food constitutes regressive taxation that hurts the poor and working class. For example, inexpensive sneakers face a tariff rate of 48 percent, compared to just five percent for a pair of leather shoes from Italy. "Contrary to unions' egalitarian rhetoric, apparently they feel it is more important to preserve their own jobs than give working Americans access to higher living standards through free trade," Gessing noted.

"While all the direct beneficiaries of trade barriers have their seats at the political table reserved, politicians may be hoping most taxpayers won't complain about going away hungry," Gessing concluded. "But with two-to-one margins of Americans saying they believe trade is good for the U.S. economy, this not-so-silent majority may yet be able to overcome the special interests' protectionism racket."

NTUF is the research and educational arm of the 350,000-member National Taxpayers Union, a non-profit citizen group. Note: NTUF Policy Paper 146, Free Trade: A Good Deal for American Taxpayers, is available online at http://www.ntu.org.