TIM CARNEY: American companies that make stuff have to compete with foreign companies that
make the same stuff, such as sugar, cars, lumber, or steel. Those foreign producers
often have lower costs, and so in an effort to protect US producers, our
government often institutes protectionist policies, such as quotas or
tariffs. But as always, when government picks winners, it also creates losers, and
plenty of those victims are right here in America.
The most obvious victim of protectionism is the US consumer who pays higher
prices for the things she buys. The federal sugar program, for instance,
places quotas on how much sugar Americans can import without facing a
high tariff. The quota reduces the supply of sugar, thus increasing the price of
sugar. That's why sugar prices in the US are constantly higher than the prices in
the rest of the world; sometimes they are two or three times the world price. If
Americans import too much sugar, our government slaps a tariff on the excess.
This cost largely gets passed on to the consumer. Politicians will say that jobs
in the sugar industry are worth you paying a bit more for a bag of sugar.
VICENTE GONZALEZ: In deep south Texas, we're proud of our sugar corporation, our sugar mill, and the jobs
they support. Our existing sugar policy levels the playing field for American
producers in the ever volatile world of the sugar market.
TIM CARNEY: But protectionism has
costs that we don't always see. While the US imports more than 2 billion in
goods each year, only about half of that are what we call "final goods", the sort of
thing you and I might buy at a store, such as sneakers or a car. The other half
are inputs. These include capital equipment and intermediate goods. For
instance, raw sugar imports are an input into the final good, which is candy.
DOUG SIMONS: Here at Enstrom Candies, sugar's very important to us, it's one of our main
ingredients. You know, without it, we'd be... well, we'd really seriously be out of luck!
KARIN THOMPSON: I was able to put three kids through college because of the job I
have with Enstrom. To ever lose this company... I just can't even imagine.
ENSTROM: To be working somewhere for eight years and then going and trying to find another
job... my family would be in big trouble.
ENSTROM: It's still a frustration to us that we
pay twice the price for sugar in the United States as the rest of world pays.
TIM CARNEY: The world price for raw sugar is less than 12 cents a pound.
Thanks to protectionism, the US price is more than 26 cents a pound. That makes
it hard for Enstrom Candies to make a profit. This is why in 2003 our sugar
quotas helped drive a Life Savers plant out of Holland Michigan into Canada
where sugar would be cheaper. A candy maker can try to raise its prices, which
would in turn affect American grocers, ice cream parlors, and their customers.
But because so many candy bars are made overseas, a price hike might not be possible.
JAMES SIMONS: It affects mom-and-pop companies like us
that can't afford to go abroad to create the candy.
TIM CARNEY: That's why, in order to stay in
business Life Savers had to move to Canada, which wasn't good for the people
of Holland, Michigan.
JOHN DRUEKE: The Holland Life Savers plant was very important to
the community. The day they announced that closing, I was in my office. They
basically told us that it was too costly to continue operations at the Life Savers
plant in Holland due to sugar prices. Well, first of all it, was a complete
blindside. Nobody had any clue whatsoever. We were
all out of a job. All these families were just out of jobs. And I really didn't
know what I was going to do. I was, I was scared.
TIM CARNEY: So these quotas and tariffs that
are supposed to protect American jobs in one industry end up costing jobs in
another. The same thing happens in every industry.
MIKE PENCE: Today's action sends a clear
message that this president, our entire administration,
are determined to put American jobs and American workers first.
TIM CARNEY: But those steel
and aluminum tariffs raise costs on US manufacturers who use steel and aluminum.
Again, all of these costs get passed along to the consumer. Paying more for
her car, her sugar, her can of soup, she has less left over for other expenses,
which creates another hidden victim of protectionism — the businesses where she
can't spend money. Finally, protectionism makes a victim of
the whole US economy. When quotas or tariffs make foreign goods unaffordable,
Americans need to start producing those goods ourselves. That takes up resources,
such as money, land, and labor that would be better allocated to other purposes. In
the case of sugar, protectionism turned swaths of the unique and irreplaceable
Everglades into agricultural land, requiring massive fertilizer use and in
turn causing damaging runoff. So of course government can help some domestic
producers through protectionism. But it hurts everyone else, including consumers,
the producers who use those imports, unrelated businesses that suffer when
consumers have less money, and the US economy as a whole. Every time government
picks a winner, it also creates losers. These are the victims of cronyism.