Monday, April 02, 2007

Protection Racket

The Wall Street Journal today reports that U.S. shrimpers are using so-called "anti-dumping" laws to extort cash payments from foreign shrimpers. Under the anti-dumping law, U.S. producers request and get tariffs imposed on importers they compete with. They only have to complain that the prices the importers sell their products at are unfairly low. Unfair to whom? Certainly not to the customers of shrimp, steel, paper and sundry other products against which anti-dumping tariffs have been imposed. No, they just have to show that it is unfair to them, the producers. So, American producers who compete for a living with all other producers, foreign and domestic, get to claim that their competitors' prices are too low.

It is a politicized, non-objective process and rewards selected American businesses to the tune of billions of dollars every year. All American consumers of these products pay more money for imported and domestic goods that are "protected" this way. Much of the extra profit that the domestic producers make gets passed around to thousands of lobbyists, lawyers, trade associations, regulators and politicians, all of whom make this racket work.

The most recent anti-dumping tariff, imposed in 2003 by the Bush Administration, raised shrimp tariffs by $100 million. Today, that process has become much more efficient and direct. The foreign producers now make cash payments directly to an association of U.S. shrimpers who, in turn, pass much of that money around to the domestic players that support the racket. The money is paid under threat that the U.S. shrimpers will call their political buddies to slap another punitive tariff on them. It was an offer the foreign shrimpers could not refuse.

When the Mob extorts money from businesses, it has to pay off judges, policemen and sometimes senators and congressmen. Today's legalized mobsters do the same thing, paying off many of the same people. All of us pay. We pay higher prices for goods and we suffer from an impaired division of labor. Less efficient and less successful producers of goods are rewarded at the expense of the more able.

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