A Stitch in Haste

Of all the various forms of economic protectionism available to faction-pandering activist legislators, the one that has always befuddled me the most is the anti-dumping law. If a foreign, state-controlled "mixed economy" is perfectly willing to sell us stuff below cost, then why would we possibly say no? Lower prices for consumers is the beginning, and the end, of the analysis.

The (entirely fraudulent) consequentialist rationalization (it is not a "rationale") for anti-dumping laws is a dynamic one: if the foreign competitor "undercuts" American firms, the latter will eventually go out of business and the former will then be able to charge higher prices. But of course, "dynamism" cuts both ways in a market: if the "evil" foreign firm ("evil," remember, because it dared to sell us cheap stuff) suddenly tries, having finished off the competition, to now "exploit" us by charging higher prices, then those "eliminated" competitors will simply re-emerge. All market power is fleeting.

In reality, anti-dumping laws -- which, remember always, prevent consumers from buying cheap stuff -- protect not consumers (or "the economy") but the domestic competitors supposedly "threatened" by the dumping. The protectionist restrictions allow them to continue to charge higher prices to consumers. This, the politicians will tell you -- is "good for America." Somehow.

Of course, protectionism is not always a simple case of politically favored industries rent-seeking excess profits from consumers. Sometimes there is another industry wedged in between the protected industry and consumers, collateral damage in the War on Low Prices.

One example of an industry taken to the cleaners by interventionism is -- the cleaners:

After a federal tariff was imposed last month on wire hangers imported from China, [Young Hoon] Jung explained, the wholesale price skyrocketed. As a result, many dry cleaners say, already slim profits have grown even slimmer.

"It increased 60 percent from one week to the next," Mr. Jung said of hanger prices. "We do 4,000 pieces a week, so obviously we need 4,000 hangers. Raise the price a little, O.K., but not 60 percent."
...
"Everyone in the Korean community is talking about it," continued Mr. Jung, who said that he might have to raise prices soon. "They're saying: 'What are we doing this for? The government? The landlords? We can't do this business anymore.'"

But of course any economically literate, or politically savvy, observer knows full well "what we are we doing this for." We are doing this, not to help dry cleaners, not to help consumers, not to help "the economy," but to help one uncompetitive industry -- one that happens to be far more influential in Washington than Korean dry cleaners.

Even ignoring the dynamic counterargument to the assertion that dumping "hurts domestic companies," what about the additional counterargument that anti-dumping also hurts domestic companies (as well as consumers, obviously).

The only resolution of the paradox is to admit that protectionism is not about economics but about politics.