Trump’s Tariffs Parallel Early Days of Necessary EPA Regulations

President Trump’s tariffs on steel are bringing both joy and worry.  The joy comes from our steel mills which have been unfairly hurt by the flood of low-cost imports (often subsidized by foreign governments).  The worry comes from some manufacturers who will pay more for the raw materials they have been importing or pay the higher prices from U.S. sources.  Eventually, they will have to raise their selling prices or absorb the increase.

True, in the final analysis, some jobs may be lost by tariffs as some are being gained.  The new equilibrium will take time to shake out.  Regardless of the final tally, this will bring the total cost of the goods affected to be in line with what they should be which will allow market forces to allocate resources more efficiently.

What does this have in common with the early days of cost increases due to compliance with EPA regulations?

Prior to the EPA, industry and cities were essentially subsidized by the environment because they performed very little clean-up of process waste.   Consequently, products were actually under-priced and municipal costs for utilities were significantly understated because the cost of effluent was being “paid” by the environment.  The result:  dangerously worsening air and water quality.  The new regulations required treatment of air and water effluent.  Sure, prices went up, but the payoff was a healthier world and new jobs for environmental equipment and services.

Just as the environment was giving a de facto subsidy to production facilities and municipalities who weren’t required to properly dispose of waste products,  U.S. fabricators (and therefore, we the buying public) have been beneficiaries of artificially lower priced products made from cheaper imports.

The result:  loss of jobs nationally and some environmental degradation worldwide.  Granted, many U.S. steel manufacturing jobs have been lost because of increased productivity, not trade issues.1   (However, such as not been the case with all industries.  Since the early 1990’s many paper industry jobs have been lost to imports which were subsidized and/or the result of unsustainable forest practices by foreign mills.The article in the foot note was written about the impact in Maine.  However, for example, the Miami Valley in Ohio has lost most of its paper industry jobs in the last two decades for the same reasons.  If Trump had been president then….)

Very inexpensive imports do some damage to fellow U.S. workers.  We can either do something about it, or fret over possible retaliation by other nations.  In the end, our products will either be considered of higher value and overcome these retaliatory policies or they won’t.  A more level playing field is the ultimate aim.  If we fail to act, we will remain an economic hostage and freeze in our tracks as the Carter Administration did during the Iranian hostage situation.  Confronting physical or economic bullies can produce justice.

… Let’s remember there are environmental reasons for not patronizing China’s polluting industries.3

 

1 – “Most US manufacturing jobs lost to technology, not trade,” by Federica Cocco, 12/2/2016, https://www.ft.com/content/dec677c0-b7e6-11e6-ba85-95d1533d9a62

2 –“Where the Paper Industry Went, by Phoenix McLaughlin, 12/14/2015, http://mainemeetsworld.bangordailynews.com/2015/12/14/home/where-the-paper-industry-went/

3 – “Nearly 14,000 Companies in China Violate Pollution Rules,” by Edward Wong, 6/13/2017, https://www.nytimes.com/2017/06/13/world/asia/china-companies-air-pollution-paris-agreement.html

 

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