Posted by on June 4, 2021 1:37 pm
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Categories: Competition & Regulation

By David Boaz, Cato Institute

 

Catherine Rampell of the Washington Post wonders why President Biden has not repealed President Trump’s costly tariffs on imported steel and aluminum from “our close economic and military allies, including the European Union, Canada and Japan.” If both the United States and our allies recognize the damage these trade barriers are doing, what are the obstacles to removing them?

 

For one, the stakeholders that benefit from the tariffs — the steel sector — are lobbying to keep the trade restrictions. It’s a “political inertia problem,” says Cato Institute senior fellow Scott Lincicome, because the tariffs have created a constituency that depends on them, and removing the restrictions could cause the industry some near‐​term pain.

 

That’s a problem for economic reformers everywhere. Every tariff, subsidy, regulation, mandate, or other government program creates winners and losers. In most cases, a small number of winners, with the losses spread almost invisibly across the whole society. Economists call it concentrated benefits and diffuse costs. The tariff benefits domestic steel producers and unions, and the costs are spread out over everyone who buys products made with steel or aluminum. Which group is aware and engaged in the debate over the issue? Obviously the steel companies.

 

It’s not just tariffs. The farm program benefits some farmers and agribusinesses handsomely, with costs spread across all the taxpayers and food buyers. Every new entitlement program has beneficiaries who are well aware of their benefits, while the costs are buried somewhere in the vast federal budget that no taxpayer can comprehend.

 

This is why advocates of small government are so concerned to block new tariffs, subsidies, regulations, mandates, and entitlements. Each one will create a new constituency that will tenaciously fight to keep it. Even a tariff that harms U.S. allies, imposed in a fit of pique by a president now rejected by the voters, has beneficiaries who organize and lobby Congress and the administration not to remove their protection.

 


David Boaz is the executive vice president of the Cato Institute.