Is there really a trade war?
When I was much younger, there was a period where I lived with my aunt Arleen and uncle John. This is a long story, but the short and simple version is that my mother couldn’t even take care of herself, let alone me. My uncle John was a retired union employee. A popular slogan used in advertising at the time was ‘Look for the Union Label’. This was meant to encourage consumers to buy not only domestic goods, but domestic goods produced in union shops which supposedly provided better conditions, benefits, and higher wages for employees.
My uncle had a coffee mug which I really, really liked. The mug had pictured upon it The Great Seal of the United States (used to authenticate certain documents issued by the U.S. federal government), and the phrase ‘Be American, Buy American!’ But, in tiny print under the last word was printed ‘Made in Japan’. It was a novelty mug meant as a gag, but I laughed so hard the first time I saw it, that it stuck with me all these years.
Nowadays, cheaply made products come to the USA more from China than from Japan. We import goods nationally to provide alternatives to local varieties, or to give consumers an item not locally produced, for instance Australian Vegemite or its cousin British Marmite. I like them both, but they are strictly foreign goods and sometimes hard to come by, as well as expensive.
Consumerism is driven by both supply and demand, as well as wants and needs. I may want Vegemite, but I don’t need it. And if it’s in low supply and priced quite high, I’ll settle for the lower costing Marmite which is more readily available. In the case of similar products both in high supply, it comes down to preference. Bottom line, you can have anything you want in the world, as long as you are willing to pay the price.
Which brings us to such topics of importing, exporting, free-trade, and tariffs.
Importing and exporting are easy enough to understand. We export or ship-out goods to foreign countries where there is demand for the good, and at the same time import exotic items like Vegemite and Marmite from overseas. It gets trickier when the items are ‘the same’ though. I might be tempted to buy a foreign good over a domestic good if the foreign product is significantly cheaper. If free trade exists between countries, a foreign country which can produce goods at a lower cost can flood the other country with its goods. This is where tariffs or duties come into play. A tariff is a tax imposed on a foreign good. Tariffs are bad for consumers. They are mostly good for domestic companies, and the government. Tariffs increase the cost of foreign goods and decreases consumption of the lower priced import. Let’s say the US decided to slap a $5 per jar import tax (tariff) on Marmite, raising the cost from $5.99 to $10.99. The one jar a year I currently buy would drop to ZERO. I REFUSE to pay that much for a mere 4.4 ounces of something I like, but don’t necessarily need.
Types of tariffs
There are five main types of tariffs, protective, prohibitive, specific, ad valorem, and revenue:
- – Protective Tariff: These push up the price of imported products as a protective measure against foreign competition.
- – Prohibitive Tariff: the tax is so high that it makes an import far too (prohibitively) expensive.
- – Ad Valorem – the tax applies to a percentage of the imported good’s value. For example, an ad valorem of 10% would mean that a product costing $100 would sell in the market of the importing country for $110.
- – Specific Tariff: A tax is levied on the specific amount – which could be the good’s weight, number, or other measurement.
- – Revenue Tariff: Imposed solely to raise government income rather than to protect domestic producers.
In each of these cases, the consumer will pay more for the good, or discontinue its use all together and the only one really benefiting is ‘The Tax Man’. Taxation is theft!
“Taxation is theft, purely and simply even though it is theft on a grand and colossal scale which no acknowledged criminals could hope to match. It is a compulsory seizure of the property of the State’s inhabitants, or subjects.” ― Murray N. Rothbard
FREE TRADE
NAFTA, The North American Free Trade Agreement is the largest free trade agreement in the world. It was negotiated by three US presidents (Regan, Bush, and Clinton) before it was finalized and signed in 1993 by President Bill Clinton. NAFTA became law January 1, 1994.
This is great for consumers in North America because it keeps the costs of goods low. But with free trade, if a product can be produced cheaper in a foreign country, there is no need for local production. This resulted in a loss of US jobs when companies like HERSHEY CHOCOLATE shifted production to Mexico where non-union labor was much cheaper. (Unions, like tariffs can also kill local production, but that’s another topic altogether.) If a company can import a product cheaper than they can produce it, and still turn a profit, they will shut down plants, slash jobs, and shift their business model from producing to simply shipping. Business is business. Here’s your pink-slip, nothing personal.
So it falls back to the consumer to ‘vote with their wallet’ if they want to protect American jobs and products. If you like a band and want to see it flourish, buy it. If nobody buys the products a company produces, they will either change their products or cease operations. Successful business rarely shut-down overnight without some long-standing cause. Many times there is an American made item that is comparable to the foreign produced good. Often the cost is same, but occasionally even a little cheaper. Sometimes not. Many domestically produced goods will sport an American flag and proudly proclaim made in the USA.
I buy Pepsodent toothpaste, Pennsylvania Dutchman Mushrooms and often check the country of origin. If it’s made in the USA, I’ll buy it over a foreign brand. Even if it’s just assembled in the USA, it still means American jobs. If there’s no readily available domestic equivalent, I will only then purchase the foreign import. For me, it’s patriotism and I have the means to support my spending habits. I do understand that there are many cash-poor people in my country for whom every penny counts, and they MUST buy whatever is cheaper, but if you live in the USA and you are in a financial position where you can support the US economy by purchasing goods made in the USA, I encourage you to do so. The job you save may be that of a friend or relative. There are many companies online that sell US made products like http://madeinusaforever.com/ for one.
As for the manufacturers of Marmite and Vegemite, no worries mates.
As always, I wish you success and happiness!
Instant Coffee Wisdom 