Regulation of International Commerce

One widely held illusion is that the United States is an island of free trade in a world of protectionism. It is true that every recent president, Republican and Democratic, has advocated more open international commerce. Over the years, the United States has reduced the rates on most tariffs and eliminated quantitative restrictions on a number of products, such as shoes, that can enter the United States.

However, most other nations have also reduced tariff rates and selective trade barriers in recent years, some to a greater extent than we have. However, no nation, including the United States, has followed the practice of truly free trade. Those of us who have been involved in international negotiations can quickly recall how well-versed the representatives of other nations are in their knowledge of US barriers to the products of other countries.

How the US Regulates International Trade

Five major types of regulations and other obstacles inhibit imports into the United States. The first category consists of statutes that restrict the import of specific agricultural and manufactured products. Some of the annual limits are very specific. Jamaica is restricted to exporting 621,149 gloves and mittens, the Philippines to 7,882,316 brassieres, and Pakistan to 4,391,160 pillow cases. Quotas on agricultural imports cover wheat, peanuts, cotton, and sugar.

A second category of barriers to imports are "Buy American" regulations. Federal agencies purchasing commodities for use in the United States can buy domestically produced civilian goods even if they are as much as 6 percent more costly than foreign goods. For domestically produced military goods, the amount is 50 percent. Also American flag vessels must be used to transport at least 50 percent of the gross tonnage of all commodities financed with US foreign aid funds. In addition, the Surface Transportation Assistance Act requires that, for most purchases over $500,000, American materials and products be used.

A third and related regulation of international commerce is the Jones Act, which requires all oceangoing shipments from one point in the United States to another to be transported in US flag vessels. This law effectively bars foreign competition in US domestic marine transport. The perverse effects are great. Residents of the "lower 48" states wanting to take a cruise to Alaska wind up driving to Vancouver, Canada to pick up a ship to Juneau or Anchorage because ship owners want to avoid the high labor costs mandated by other federal regulations.

Selective high tariffs constitute yet another category of government obstacles to international trade. Despite low average duties (a little less than 5 percent), some individual US tariffs are quite high. Silk and woolen-blended fabrics face a 38 percent duty, three times the rate in Western Europe. Importers of soccer uniforms and footwear pay a 35 percent tariff, as do importers of garlic and dried onions.

A fifth category of trade barriers is the array of state and local building codes. Government authorities typically enact the standards drawn up by private building associations. This act opens the way for imposing discriminatory rules favorable to the local industry. Ceramic tile provides a good example. After Japanese imports gained a substantial share of the US market, many building codes were revised to screen out imported wall tile by requiring a thickness of 1/4 inch. That rule disallowed tile produced in Japan and also in Europe which has a standard thickness of 5/32 inch.

Ironically, the United States also maintains special regulatory restrictions on our own exports. Under the Federal Insecticide, Fungicide, and Rodenticide Act, exporters of products deemed hazardous in the United States must notify the importing country 30 days in advance of shipment even if the item is not viewed as hazardous under the laws of the importing country. The importing nation must notify the exporter that the notice was received. No other country has such a restriction.

We may support free trade in theory, but the United States is hardly free of protectionism.

Murray Weidenbaum is chairman of the Center for the Study of American Business.