by Bruce Yandle
Something as simple as a March 5 telephone call from President Joe Biden to EU Commission President Ursula von der Leyen brought a temporary trade-war cease-fire and a four-month hold on high-volume tariffs imposed by both nations. Hopefully, it points not to months, but to decades, of calm, wealth-enhancing trade for U.S. and European consumers.
Because of an ongoing dispute regarding government subsidies of aircraft production, the United States had imposed tariffs on $7.5 billion of consumer goods — including wine, whiskey, cheese, olives and aircraft — exported from Europe. The EU answered with tariffs on $4 billion of U.S. goods — wine, rum, brandy, vodka, luggage, nuts, cherries and also aircraft — shipped their way.
From a distance, the dispute was reminiscent of a park scene where two preschool-age children play happily in a large sandbox. All is well until, for some reason, one tosses a handful of sand in the face of the other. What next? The offended child throws an even larger handful. In seconds, a sand war takes place. Toy shovels and buckets fly. A parent intervenes.
“They started it,” is one child’s tearful answer. The second sobbing child responds, “But they threw a whole bucketful at me!” Everyone who had been enjoying a pleasant day is made miserable and worse off.
Calm intervention and some appropriate face washing can, at times, help. Maybe a visit to an ice cream parlor will do the trick. But it isn’t always quite that easy, at least in my experience. Most of the time, we went home, got cleaned up and had a hard talk about how to behave. Peaceful coexistence and gains from trade had to be taught, even when the commodities were play and friendship.
That gets us back to the four-month trade truce. Yes, a truce can help when national leaders at the behest of special interests throw sand over trade policy, knowing full well that freer trade is a win-win. That’s certainly been happening in recent years. But why should we dignify the behavior by empowering national leaders to throw sand in the first place? Why give them the power to decide what we can choose to buy with our own earnings?
Perhaps it’s because consumers have no real voice in the matter. Trade negotiators and presidents are the players. And they tend to speak in terms of “harmed industries,” “jobs” and “leveling the playing field.” In the current situation, for example, Von der Leyen called the cease-fire “excellent news for businesses and industries on both sides of the Atlantic.” There was no reported mention of consumers.
A spokesperson for the U.S.-based Distilled Spirits Council said, “Lifting this tariff burden will support the recovery of restaurants, bars and small craft distilleries across that country that were forced to shut down their businesses during the pandemic.” Good things one and all, but no interest group representing consumers was quoted.
There is a disconnect here; a lack of accountability. Put another way, there is no apparent recognition of an important notion by Adam Smith, the father of modern economics: The end purpose of all production is consumption. In fact, no national consumer group registered much of an outcry when the tariffs were placed on large categories of consumer goods in the first place. Nor was there an especially powerful dissent heard from the representatives of the people in Congress.
And the rest of us? Over time, we pay a significant price for tariffs, but it’s a nickel here, a few dollars there. So we don’t have the same motivation to organize and lobby as does a tariff-seeking special interest group. And we tell ourselves that we have better things to do than worry about those sand-throwing children. After all, children will be children.
Maybe this really is the time for that fresh start. Perhaps President Biden needs to make a few more telephone calls to the heads of state caught in harmful sand-throwing situations where no one is winning. And maybe, just maybe, Congress should reconsider the power delegated to presidents to engage in undisciplined sand throwing in the first place.
This could be the start of something good.
Bruce Yandle is a distinguished adjunct fellow with the Mercatus Center at George Mason University, dean emeritus of the Clemson College of Business and Behavioral Sciences and a former executive director with the Federal Trade Commission.
