More government means more expensive everything. Every second and penny spent paying government taxes and complying with government regulations – raises the prices of the goods and services people proffer.
And more government makes it more difficult to innovate – to create and improve goods and services. Innovation is delayed or outright prevented – because the time and money wasted on government could be much better spent developing the next great things.
More government also inflates the prices of everything trade. It ain’t free trade – if governments are involved.
“Trade Wars” actually aren‘t about trade – they are about government trade policy.
If peoples are trading freely, there isn‘t a “War” – there‘s commerce. The “Wars” only happen when governments get involved – placing tariffs, regulations and subsidies in the way of the flow.
It becomes a regulatory arms race. A government imposes another subsidy or tax. So several others in response impose new subsidies and taxes of their own. Lather, rinse, repeat.
A horrendous example of government policy Trade Wars – is all things farm.
(O)ur Farm Bill – which warps our market – has warped the world‘s as well. (Franklin Delano Roosevelt) helped beget an eight-decade-long international regulatory arms race.
Other produce-producing nations saw our lattice-work panoply of tariffs and subsidies – and felt compelled to match them. And then exceed them….
So what we now have is a global lattice-work panoply of tariffs and subsidies. A thicket that grows ever thicker – as each next government tries to outdo the last.
How bad has it become? Just on the government money side?
- All countries, both industrialized and developing, support their agriculture sectors, but use vastly divergent policy tools and combinations of tools. Most use guaranteed minimum prices and import tariffs to protect domestic producers.
- Industrialized country governments are moving from price supports toward decoupled direct income payments.
- Developing countries supplement their price support programs with input subsidies, which are excluded from calculations of the Aggregate Measure of Support (AMS) by the World Trade Organization (WTO), but are nonetheless trade distorting.
- Developing countries‘ tariff protection is higher than that of industrialized countries.
- The use of sanitary and phytosanitary (SPS) measures to restrict imports are more frequent among developing countries than in developed countries.
That’s a mess.
Let us now address a prominent argument against calling for other governments to reduce subsidies alongside our government doing the same.
“If foreign governments want to subsidize the stuff we import – why stop them?“
We’d like other governments to stop taxing our stuff that they import, yes?
Well – how do you think these countries pay for their subsidies? With their taxes on imports, perhaps?
Money is fungible. And it is highly likely these governments view their taxes on goods they import and their subsidies for goods they export – as related. As the former paying for the latter. Very un-Potato Head of them.
You aren’t going to get them to get rid of their taxes on our stuff – unless you also convince them to remove their subsidies on theirs.
There is in the House on Wednesday a hearing:
At which this international nightmare mess will be examined.
Here’s hoping House Concurrent Resolution 20 serves as a template – for the hearing, and all things trade.
Expressing the sense of Congress that all direct and indirect subsidies that benefit the production or export of sugar by all major sugar producing and consuming countries should be eliminated.
It would mean much less government – and much cheaper stuff. Here – and everywhere else.