Who Pays The Tariffs?

As predicted, the steel industry has bellied up to the federal concession stand for all forms of relief and favors. The emotionally charged premise is that the steel industry is vital to our defense and economic strength. This same argument was successfully used by the airline industry several months ago. The line forms to the left... please take a number.

Tariffs, bailouts, quotas and subsidies not only don't make economic sense, but are downright immoral. How would it be any different if we use tax dollars and imposed higher prices to salvage one segment of the economy or if we just went door to door with a gun and forced people to hand over some cash to benefit their neighbors who happen to be employed at one certain factory or another? Why are certain companies as well as certain unions/members entitled to their incomes regardless of whether their product is wanted or needed? How can the general public be punished by being denied a cheaper or better product in deference to those who refuse to be competitive?

US Steel, as far as I know, does not have a mandate from God to be the largest supplier of steel products in the United States. We do not have an obligation to prop up one entity or another regardless of their own inefficiencies or mismanagement. The steel industry is important to our country but no particular steel company has the right to impose its needs on others. (The same goes for airlines, farmers and textile manufactures, to name a few.)

The issue that the workers, unions and companies overlook is that by imposing tariffs, subsidies and trade restrictions, they are accelerating their own demise. The main purpose of all three is to artificially inflate the price of their goods. Foreign competitors don't pay this price increase...their customers do. Like everything else, as price goes up, demand goes down. Not only does the demand for the end product go down, as consumers put off buying that new car or refrigerator, but demand for raw steel goes down when fabricators start to substitute other materials. In spite of the utopian wishes of those who make steel, very few products enjoy a totally inelastic demand curve. More and more car parts, for example, are manufactured from plastics and alloys. As the price of steel were to increase, engineers would be encouraged to find other materials to substitute.

Foreign steel would still find its way into this country in the form of foreign cars, appliances and other consumer goods. Not only would this adversely affect steel manufacturers, all those industries dependant on steel would lose business as consumers turn away from domestic products in favor of less expensive imports. The compounding affects would be deleterious to the entire economy, not only costing the jobs in steel, but across the entire manufacturing spectrum.

This is so obvious that it is almost embarrassing to type it. Yet the reason big companies and labor unions can convince so many honest people to support their distorted views is by equating themselves with the industry. They manage to conjure up sympathy for their eminent demise by appearing to be the very embodiment of that industry. In reality an "industry" is a cold, heartless, impersonal entity. People and companies do not represent or make up an industry. Instead they are permitted to participate in an industry, provided they have the skills and aptitude to excel in it. If one company fails, and a demand still exists, another, more efficient company will quickly fill the void. If all demand drops, there is no moral imperative to sustain the same level of production for any reason.

This sounds cruel and uncompassionate but in fact is a beautifully self adjusting system that benefits all. As industries adjust to changing needs and demands, occasionally segments will be required to dramatically change. As technology changes, those willing to adapt should be rewarded for their risks and those unwilling should not be able to retard the process for their individual benefit. Instead, all would benefit, including those who may have to change careers or portfolios in the process.

The alternative is to give in to one boisterous segment at the expense of all others and the detriment of all.