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  • Is the House Trying to Start a Trade War?

    Is the House of Representatives trying to start a trade war in the midst of the worst economy in a generation? Sure seems that way. When the House passed the Energy and Water appropriations bill they included a protectionist provision that is not only misguided, but it is poorly applied. The law states:

    “None of the funds made available in this Act may be used to purchase passenger motor vehicles other than those manufactured by Ford, General Motors, or Chrysler.”

    Not only does this bill ban foreign competition, but it names just three companies that can receive contracts. This is pretty extraordinary, even for protectionists. We are not the only ones to notice this move; our Japanese and European allies have already voiced concern over this current attempt at a protectionist policy.

    Protectionism ends up hurting American consumers and producers far more than it helps them. Countries that we target with protectionist policies will retaliate against American firms. Protectionism hinders economic growth and it will only further economic hardship. The protecting part of protectionism, in fact, does not help American consumers or producers. By placing additional tariffs and burdens on trade, Americans pay a higher cost for the goods they purchase. In effect, they are taxed by this protectionist scheme. Every dollar spent funding a protectionist regime is one dollar that cannot buy an additional product or hire an additional worker.

    Heritage’s research proving this point can be found here , here , and here. Also, for the audio-visually inclined, a great video from Reason can be seen here.

    But the more interesting objection is that this provision will not actually accomplish the protectionist ends its authors seek to achieve. Why? The answer is that foreign cars sold in America are not really all that foreign.

    What is an American car?

    Typically, one thinks of Ford, GM, and Chrysler—the ‘Big 3’—as the manufacturers of American cars. But foreign-owned car companies manufacture their products in the United States. Kia, Hyundai, Toyota, Nissan, and Honda all have large production facilities in the United States and many of them have design operations and R&D in the US. Tens of thousands of Americans design, engineer, and build these ‘foreign’ cars.

    Indeed, Volkswagen will be opening a new facility in Tennessee which will create thousands of more American jobs. It is worth questioning how America will attract investments such as this one in the future if its government chooses to favor one set of American manufacturers over another.

    We live in an economically interdependent world. American car companies are increasingly trying to sell their goods to other countries and ‘foreign’ companies increasingly build their cars in the US to sell to Americans. By singling out the ‘Big 3’ for special treatment, the House is heading down an economically disastrous path.

    Posted in Economics [slideshow_deploy]

    4 Responses to Is the House Trying to Start a Trade War?

    1. Roger S., Ma. says:

      I don't think they're trying to start a trade war. I think it's two things. About half of them are indeed too stupid and/or careless to see through the wider consequences of what they're doing. Plus, they have their ideologies, which must be served, which is a form of self-made stupidity. That's the one side.

      The other side is, we voters have allowed them to develop a culture where getting elected and reelected is everything. That's become the one and only thing they're really good at.

      So, if voting this way or that gets them $$$ from the UAW, or the Teacher's Union, or the endorsement of ACORN, or the likely support of an ever enlarging army of the poor, that's how they'll vote. Whether any of it makes sense, or is the right thing to do, or is good for the country, but maybe not so good for their district, or vice-a-versa, or supports the Constitution, or at least their understanding of it, in short is a principled stand on any issue, becomes irrelevant except for the "lip-service" on election-eve.

      The name of the game is to make the right deals to get enough funds to get enough support to be reelected. I think this country has gone past the "tipping-point" already, and the only way to stop this short of blood in the streets will be to rigorously vote in every challenger in the next several elections, and vote out every incumbent, sadly even the few good ones. We'll have to do this for the next, say, three to five election cycles. It's the only way to really get every voter engaged to the goal of a "house-cleaning". As soon as the voter has to actually decide on the merits, the tendency will be to revote the incumbent unless he is really, really, bad. In all other cases, media manipulation will, given enough $$$, tend to make him look good even if he just "sold his grandma". It's sad, but that's what I see. — It may take the better part of a generation until the mandate for honest and reponsible service regains its proper importance to our representatives. Sounds quaint, but this country needs more Calvin Coolidge and less FDR. Obamania is something it doesn't need at all.

    2. Pingback: » Financial News Update - 07/30/09 NoisyRoom.net: Where liberty dwells, there is my country…

    3. Spiritof76 says:

      It is amazing to me that we have such a collection of stupidity, ignorance and arrogance concentrated in one place. It had taken over 200 years to degenarate the Capitol from shining brilliance to the darkness of stupidity.

    4. Zabool says:

      After reading the Heritage’s constant drum beat in support of off-shoring American Manufacturing and Technology for years, I have come to this conclusion:

      It is the Heritage Foundation that is “stupid”

      How did you think that the dismantling of our industrial base, empowering China and cutting funding for American R&E was going to be good for us?

      Why would you think that this orgy of outsourcing wasn’t going to lead to protectionism?

      LOOK AT THE RESULTS, for crying out loud! And yet, you still beat the drum in the vain hope that your inane, greed-based, economic theories may somehow be right.

      You have met the stupid, and it is you.

      It's time to grow-up gentlemen.

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