THE TTALK QUOTES
On Global Trade & Investment
Published  By:
The Global Business Dialogue, Inc.
Washington, DC   Tel: 202-559-9316
Email: Comments@gbdinc.org
No. 9 of 2018
THURSDAY, FEBRUARY 22, 2018

Click  here for Tuesday's quote on Hong Kong from Anson Chan.

ON COUNTER PRODUCTIVE TARIFFS 

"Based on analyses by the National Association of Manufacturers (NAM), the MTB Act of 2017 (now 2018) would eliminate import tariffs of more than $1.1 billion over the next three years and boost U.S. manufacturing output by more than $3.1 billion."

Linda Dempsey
December 6, 2017
CONTEXT
From the entry into force of the U.S. Constitution in 1789 until early in the 20th Century, tariffs were the U.S. government's principal source of revenue. That all changed with the ratification of the Sixteenth Amendment, which made income taxes part of the Constitution. Protecting American industry, however, has always been some part of the equation, an element in the rationale for having tariffs at all. So when tariffs are doing U.S. companies more harm than good, it makes sense to eliminate or suspend them. 

And for the last 30 years or so Congress has routinely passed so-called miscellaneous tariff bills to suspend those duties. That process stalled after 2012, however, when the last set of miscellaneous tariff suspensions expired. Alas, those miscellaneous tariffs got caught up in the politics of earmarks - at least that is our understanding of the issue. To its credit, Congress found a solution to the problem that may in fact be about as good as it gets. To quote from the letter to Congress that is the key to today's entry:

Congress now has the opportunity to address this self-imposed tax on U.S. competitiveness. Through a transparent and thorough process created by the American Manufacturing Competitiveness Act of 2016 (AMCA), which passed Congress with near-unanimous bipartisan support, the U.S. International Trade Commission (ITC) scutinized thousands of petitions for duty-relief and received input from across the manufacturing sector and from the U.S. Department of Commerce and U.S. Customs and Border Protection to determine eligibility under the AMCA requirements. 

Congress has now written the fruits of that exercise into legislation, The Miscellaneous Tariff Bill Act of 2017, H.R. 4318 and S. 2108. 
 
***

Linda Dempsey is the vice president for International Economic Affairs at NAM, and The Miscellaneous Tariff Bill Act was the topic of her December 6 post on The Shopfloor, NAM's highly regarded blog. Specifically, she was urging Congress to pass the bill.

And six weeks later one house did. A few minutes before 7 p.m. on Tuesday, January 16, 2018, the U.S. House of Representative passed H.R. 4318 by a vote of 402 to zero. Some 28 members failed to vote, but some of those have subsequently said that they would have voted for the bill if they had been there.
COMMENT
That vote certainly suggests that this is not a controversial bill and that, at some point, the Senate too will pass it. The question is when? To coin a phrase, time is money. That is to say, the more time that passes without the legal suspension of these tariffs that injure rather than protect, the more money U.S. producers will spend on taxes they can ill afford. Andrew Durant of Samuels International Associates put it this way: 

"Support in the Senate seems strong. But every day lost means business pays another $1 million in taxes for inputs that power American manufacturing." 

In Praise of Lobbying. But let's leave the issue of Senate action for now and return to the process that has been playing out these last few years. The job that Congress handed to the International Trade Commission is a big one. Anyone who doubts that should take a look at the ITC report, which is the basis of the current legislation. The work load here is not just that of the staff of the International Trade Commission. It is also the efforts of all of those men and women around the country who filed petitions in the hope of making their companies more competitive. 
 
And last but not least there are the private organizations in Washington - entities like NAM and the U.S. Chamber of Commerce and many others - who are in the business of explaining to Congress and the Administration (and sometimes the courts) just what the practical ramifications are of the laws they pass - or don't pass - and the regulations they enforce. 

Ms. Dempsey's December 6 blog. Its immediate subject was a letter that NAM and roughly 190 other organizations had sent earlier that day to the House of Representatives. Forget the subject matter, just gathering 190 plus approvals must have been a task in itself. And these communications do have an effect. 
 
In her December 6 post, Ms. Dempsey talked about some of the products and companies affected. The lion's share of the products are chemicals, but many are less arcane, more easily described products. For example, she mentioned the motors that Lasko Products of Pennsylvania imports for the pedestal and desktop fans it makes. It is the only U.S. company still producing such fans. Most of the others are from China. She also talked about the molds that Goodyear needs to import in order to make large, off-road tires for earth moving equipment. 

We doubt that it is entirely coincidental that Congressman Mike Kelly (R) of Pennsylvania also talked about Lasko Products. He did that on the House floor, shortly before the vote on January 16. Here is what Rep. Kelly had to say about Lasko: 

Mr. PASCRELL [D-NJ] and I sat in a hearing and we listened to these folks as they talked about what makes them competitive, what takes them off the shelf where they can't compete, and too often it was their own country that was making it difficult. Lasko is an 11- year-old company. They employ 1,000 people.

Now, Mr. McCasey, who is the chief operating officer, came and talked to us. When you hear what goes on with Lasko-this is in his words, and I think this is where we have to really concentrate-Mr. McCasey says: We are in a business of pennies and can sometimes lose the sale of a fan to an overseas competitor due to a cost differential of 20 to 30 cents.

***

In this household, we have two Lasko fans. Other than that, our knowledge of Lasko Products is limited to what we have shared here. Our point is simply that good law depends, among other things, on good communication between citizens and law makers, and it is groups like the NAM and the U.S. Chamber of Commerce that help to ensure that the critical conversations takes place.
SOURCES & LINKS
From the Shopfloor is a link to Linda Dempsey's blog post of December 6, 2017. This was the source for today's featured quote.

From the ITC. This is a link to the U.S. ITC document entitled "American Manufacturing Competitiveness Act of 2016: Final Report.

A Letter from NAM is the January 16 letter to every member of the House of Representatives, urging a "yes" vote on H.R. 4318, the Miscellaneous Tariff Bill Act of 2017. The letter was signed by Aric Newhouse, Senior Vice President for Policy and Government Relations at the National Association of Manufacturers.
   
From 190 Organizations is an earlier letter to Congress on urging action on the Miscellaneous Tariff Bill.

Remarks of Mr. Kelly is  a link to the page of the Congressional Record for January 16 with the remarks of Representative Kelly quoted above.

 The Bill takes you to the pages of the Congressional Record for January 16 with the text of H.R. 4318.

The Vote takes you to the pages of the Congressional Record for January 16 with the roll call vote on H.R. 4318.

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