Thursday, January 01, 2009

No Bailout Necessary, Just Reduce Punitive Tariffs to Save and Create More U.S. Jobs

Tariffs are usually used to protect domestic industries from more efficient foreign competitors. But domestic firms also buy inputs, raw materials, supplies, parts and inventory FROM foreign producers, and in fact more than half of U.S. imports are industrial supplies and parts, and NOT finished consumer goods. In that case, tariffs are a tax on the inputs of domestic businesses and can put them at a significant competitive disadvantage.

Case in point: There is a punitive tariff of up to 17.2% on an imported specific micro-denier suede fabric used extensively by Mississippi furniture manufacturers Lane, Bauhaus, and H.M. Richards. This tariff is about to be removed, saving each of these three firms more than $1 million annually, and saving close to 1,000 jobs in NE Mississippi.

Read about it here, here and here.

HT: Taxing Tennessee


At 1/01/2009 12:58 PM, Blogger sethstorm said...

That doesn't take care of the issue of product quality.

No thanks.

At 1/01/2009 1:36 PM, Anonymous Anonymous said...

That doesn't take care of the issue of product quality.

That's not the government's problem. Quality is an issue for the customers of the importing firms. It's nobody else's business.

At 1/01/2009 6:04 PM, Blogger The Happy Hospitalist said...

You need to put a search bar on your blog so we kind find your old stuff. Great Blog.

At 1/01/2009 6:43 PM, Blogger Mark J. Perry said...

Happy Hospitalist:

There is search option in the upper left corner of the screen, you can search back through the most recent 20 postings with a search word. It's a little more work, but you can also do an advanced Google search (from Google's home page) for a specific website/URL, and that will return more than 20 matches.

At 1/01/2009 8:05 PM, Blogger PeakTrader said...

Summing up the Bush Presidency

It's not surprising a journalist threw his shoes at President Bush, because they've been throwing shoes, in less obvious ways, at Republicans for years. Recall, what happened to Sarah Palin. The shoes really came off fast for her.

Given how journalists underestimate Republicans, and overestimate themselves, it's also not surprising the shoes missed Bush, although he threw them from only three rows back and had two perfect shots. Anyway, the shoe throwing fiasco is the one picture that best sums up the Bush Presidency.

At 1/01/2009 8:17 PM, Blogger The Happy Hospitalist said...

Mark. I did Google:

"Carpe Diem, Blog, Social Security"

Hoping to find the graph you had previously about the comparison of SS vs private investment.

I couldn't find it.

If you had a Google search bar embedded on your page that allows readers to search only in your blog, I bet I would have found it. Even if it was 2000 posts ago.

Just letting you know...

At 1/01/2009 8:28 PM, Blogger Malachi said...

Happy Hospitalist,

Try this:

social security

At 1/01/2009 8:30 PM, Blogger Malachi said...


What does that have to do with this blog posting?

At 1/01/2009 8:48 PM, Blogger PeakTrader said...

Marcus, I thought you could use some entertainment :)

I've stated before, a bailout is necessary, because U.S. consumers paid export-led countries and export-led countries bought U.S. Treasury bonds. Also, there was an enormous shift of wealth from savers, including foreigners, to borrowers, including lower income Americans. So, the U.S. government needs to fund U.S. firms, particularly financial firms, to correct this imbalance.

At 1/01/2009 8:58 PM, Anonymous Anonymous said...

Hey Peak, the Iraqi journalist missed George only because W has at eight years of practice at ducking and dodging the media and he's darn good at it.

"Hospitalists" - cute couple. That's what this blog needs.

At 1/01/2009 9:17 PM, Blogger PeakTrader said...

Mika, it seems a little unfair Bush is rated one of the worst presidents, while Obama is already rated a great president.

Here's an amusing article:

Associated Press

SAN FRANCISCO — San Francisco International Airport is planning to give guilt-ridden travelers a chance to offset the air pollution emitted from their plane rides.

The airport says it will set up a series of kiosks so travelers can purchase certified carbon offsets. A pilot program is to be launched this spring.

Travelers will enter their destination into the kiosk, which will calculate the amount of carbon dioxide for which they are responsible and the cost of offsetting it. After swiping their credit cards, they would get a receipt listing the exact carbon-reducing projects their money went to.

The program is not the only option that travelers have. Delta Air Lines Inc. offers its customers an opportunity to purchase carbon offsets on its Web site.

My comment: I think it's obvious, there was a steady stream of negative news on Palin before the election. Palin offset Obama, although she was running for VP instead of President. However, McCain turned out to be a bigger joke than Obama. So, perhaps, the American people made the right choice.

Some media comments:

“The fact of the matter is, the comparison between her [Sarah Palin] and Hillary Clinton is the comparison between an igloo and the Empire State Building!”
— Host Chris Matthews on MSNBC’s Hardball, October 14.

Reporter Deborah Solomon: “You helped re-elect Bush in ’04 when you gave $3 million to the Swift Boat campaign to discredit John Kerry’s Vietnam service. Do you regret your involvement?”
Businessman T. Boone Pickens: “Why would I?”
Solomon: “Because it’s such an ugly chapter in American political history.”
Pickens: “Oh, I see. Well, it was true. Everything that went into those ads was the truth.”
Solomon: “Really? I thought it was all invented.”
— From a “Q&A” exchange published in the New York Times Magazine on Sunday, August 3.

“To see his [Jeremiah Wright’s] career completely destroyed by three 20-second soundbites, all of the work he has done, his entire legacy gone down the drain, has been absolutely devastating to me -- to him, sorry....We are still a racist country....I think that so many white people who had never been inside a black church were absolutely shocked by the tone and language that they heard [from Wright]....I think it brought out a lot of latent racism.”
— Washington Post writer Sally Quinn on PBS’s Charlie Rose, April 30.


A media study:

Major findings:

Major network news shows ran 69 stories about Sarah Palin between September 29 and October 12. 37 stories were negative, just 2 were positive, and 30 were neutral. Not a single evening news show ran a positive story about Palin.

Overall, 21 network stories portrayed Palin as unintelligent and unqualified. 8 of these stories played a total of 11 clips of Saturday Night Live ridiculing Palin. 14 segments featured the most embarrassing clips from Palin’s interview with Katie Couric.
9 stories emphasized attacks on Palin by conservative columnists.
14 stories demonized Palin as little more than John McCain’s attack dog.

ABC was hardest on Palin, with 9 negative stories (60%), 6 neutral (40%) and no positive stories. NBC ran 15 negative stories (54%), 13 neutral (46%) and no positive stories. CBS ran 14 negative stories (54%), 10 neutral (38%) and 2 positive (8%).

At 1/01/2009 9:37 PM, Anonymous Anonymous said...

(1) Yes, apparently it's sure easy to be great President before you even move into the white House!
. . . time will tell.

(2) Palin is what she is. The media simply showed her to us and we could see she didn't measure up. . . . When are we going to stop trying to kill the messenger?

At 1/01/2009 10:09 PM, Anonymous Anonymous said...

Prof Perry has just been PWNED over at Michael Panzner's blog

At 1/01/2009 10:19 PM, Blogger All-Mi-T [Thought Crime] Rawdawgbuffalo said...

Point well taken, but seems like stuff is about to hit the fan and depression is Nipping at our Nose

At 1/01/2009 10:30 PM, Blogger OBloodyHell said...

> The airport says it will set up a series of kiosks so travelers can purchase certified carbon offsets. A pilot program is to be launched this spring.

Oh, give me a concession on this.


"Here, buy some trees so you can feel less guilt about your 'carbon footprint' you fool. We'll happily plant some trees somewhere, ignore them for two years, then tear out the dead remnant and plant another one for some equally stupid idiot out there in the exact same spot."

It is hard to imagine a scheme not run by a government with a greater opportunity for charlatans and scammers than "carbon sequestering".

At 1/01/2009 10:40 PM, Blogger OBloodyHell said...

Anony-mouse blathers:
> Prof Perry has just been PWNED over at Michael Panzner's blog

Oh, yeah:

"While the future trend for this series might not follow the same trajectory as before, the fact that it hasn't yet hit double-digits is not necessarily a cause for optimism."


"We can't disprove his point, but we certainly disagree with it!"

Oh, yeah, that's pwnage, all right.... LOL.

Imbecile. Clothead. Poltroon.

One finds all the above adjectives applicable to you, and many, many more of similar color and derisiveness, Mouse.

What did you do, Mouse, bet your idiot friend you could deliver some traffic to his site?

At 1/02/2009 4:03 AM, Blogger sethstorm said...

That's not the government's problem.

Unless you consider product safety something completely separate from product quality, it is (and has been) their problem.

Perhaps this time it would be wise to not draw the anger of citizens(especially the ones of the "Rust Belt" states). The only thing it has done is give them plenty of room to target what put them out of work.

At 1/02/2009 8:48 AM, Blogger Mark J. Perry said...

Happy Hospitalist:

You can go to Google's Advanced Search here, and use the "Search within a site or domain" option to get a comprehensive search of Carpe Diem or any other blog or website.

At 1/02/2009 3:31 PM, Blogger The Happy Hospitalist said...

got ya. Thanks.

At 1/02/2009 4:13 PM, Blogger QT said...


Talk about dodging shoes! How on earth does one get from tarriffs that affect domestic industrial production to Sarah Palin?

Can understand that you are tired of hearing about the messiah, Obama. Moonlight & magnolias don't last forever.


MP is fully capable of defending himself although chances are that he enjoys that his post has stirred up some controversy and made a few light bulbs go on if even to disagree. In order to disagree, one must actually consider the ideas presented.

The fact that the linked post cannot provide hard data to support the opposing view undercuts the main thrust of the counter-argument. Invoking a what-if doomsday scenario doesn't exactly cut it.

Tis the season to cool it...tap into your inner Steve McQueen.

At 1/02/2009 6:38 PM, Anonymous Anonymous said...

made a few light bulbs go on if even to disagree

Bullshit. Eliminating the tariff in a specious free trade zone (FTZ) puts other domestic furniture manufacturers at a competitive disadvantage.

Previously, the Mississippi furniture manufacturers could import the specific micro-denier suede fabric entire roll with a tariff or import the cut pieces without same. In other words, the fabric can be cut to spec in Asia with no duty, and now cut to spec in FTZ Mississippi with no duty.

The economic law of unintended consequences is writ large with this boneheaded decision by the Commerce Department. It's just Bush43 masquerading economics for the southern Republican base polity. Did you know that Haley Barbour, the governor of Mississippi, was the former chairman of the Republican National Committee in a previous life?

And I thought that Toyota was going to equip an auto assembly plant to produce the Prius near the birthplace of Elvis which is in the same geographic zone as the 3 politically connected furniture manufacturers.

At 1/02/2009 7:36 PM, Blogger QT said...


The auto industry is looking at a serious financial downturn. What company executive would not postpone a major capital expenditure? Get a grip (rather than a gripe).

Far better argument from the Textile Manufacturer's Assoc. Unfortunately, you have upended your own argument by telling us that manufacturers can "import the cut pieces without same". Is this a punctuation error? Doesn't that mean that all furniture manufacturer's can get duty-free pre-cut pieces? Where is the competitive disadvantage?

It appears that the Textile industry is unlikely to be destroyed by a single fabric which is currently already being pre-cut in Asia and imported anyway.

So how does having to employ an American to cut the fabric hurt other furniture manufacturer's who just get Asians to do it?

At 1/03/2009 11:24 AM, Blogger Dominic said...

I agree. What state do the poor saps that don't get political favors live in that will be out of a job next.

What is the Tariff on the exports to Asia from the US Furniture Manufacturers?

Let's make it easy on the Commerce Department and put a 20% Tariff on everying coming across our boarders!!!!!!!!!!!! Take that Korea, Japan, China and Lower Slobovia.

At 1/03/2009 2:19 PM, Blogger QT said...


..or you could review the chapter on comparative advantage in your Econ text. These are the same protectionist arguments Adam Smith refuted in The Wealth of Nations.

Have you considered that U.S. furniture manufacturers and their workers might be better off using cloth in bolts rather than pre-cut pieces. Buying cloth in bolts allows the manufacturer to adjust the production line to meet changing customer demand; the business model is more flexible and more likely to be commercially successful/competitive.

Anon has not made a case for the effects on the textile industry. It is difficult to imagine the imminent collapse of this industry by virtue the importation of a single variety of fabric.

Foreign producers also make and export furniture to the U.S. Tariffs on cloth in this case, hamstring the domestic producers. Since furniture manufacturing is more complex and labour intensive than the manufacturing of cloth which is highly automated, many more jobs are put at risk protecting the domestic textile industry which by its automated nature employs far fewer workers.

Perhaps, you could explain why you support tariffs in this particular instance.

At 1/03/2009 2:52 PM, Blogger QT said...

For all practical purposes, the tariff supports the textile industry at the expense of the furniture industry. Consider if you will, the types of workers in those industries:

The textile industry does not employ weavers but highly skilled mechanics who keep the machines working and managers. In other words, high skilled, knowledge workers whose expertise can be migrated to different industries.

The workers in the furniture manufacturing facility are lower skilled workers with less adaptable skills.

Is it appropriate to structure tariffs to protect the interests of the most skilled and best organized at the expense of the least skilled?

At 1/03/2009 5:55 PM, Anonymous Anonymous said...

Where is the competitive disadvantage?

Duh. Only the 3 manufacturers in FTZ Mississippi (the FTZ was a creation of one of FDR's New Deal policies in 1934, BTW) can now import the fabric rolls free of duty.

It's a simple proposition. The Commerce Department should have rolled back the duty on the imported fabric for all domestic furniture manufacturers.

...the tariff supports the textile industry at the expense of the furniture industry

No. The fabric is not manufactured in the US.

At 1/03/2009 8:25 PM, Blogger OBloodyHell said...

> Dominic blathers:

Let's make it easy on the Commerce Department and put a 20% Tariff on everying coming across our boarders!!!!!!!!!!!! Take that Korea, Japan, China and Lower Slobovia.

Yeah, like THAT hasn't long been attributed as a prime cause of the length and depth of the Great Depression -- every nation attempting to "protect" its own industries by setting up enormous trade barriers.

As the phrase pretty much goes --
"Those with no concept of history are doomed to repeat it"

At 1/03/2009 11:30 PM, Blogger QT said...

"No. The fabric is not manufactured in the US."

Anon. Using your idiom.

Duh. The foreign made fabric competes with domestically produced fabric. Hint: Your own link is from the NATIONAL TEXTILE ASSOCIATION. Since when have these folks represented competing furniture manufacturers?

Their concern is the precedent of allowing a single fabric to be exempted from tariffs. Screw the furniture manufacturers.

Your own post tells us that pre-cut fabric from Asia bears no duty so the other competing furniture manufacturers can still avoid the duty by buying pre-cut pieces rather than bolts of fabric. So the competitive disadvantage is not material. The purpose of the tariff is to try to force furniture producers to buy domestic cloth rather than foreign produced cloth by introducing some complications ie. will the fabric be correctly cut; if consumption patterns change, will the manufacturer be stuck with pieces that can't be used?

So we are back to the textile industry which does not want bolts of fabric from foreign producers without whopping tarriffs.

You have still not explained why protecting a handful of highly skilled workers in the fabric producing industry over many more low skilled, lower income workers is the right thing to do. The portions of the textile industry with high labour components are in the area of finished goods ie. bedding, towels, garments not the portion of the industry that produces fabric.

From where I sit, the more assertive, empowered group is gaming the system in their favor at the expense of the more vulnerable, less adaptable workers. You haven't really addressed this issue of social justice.


I once heard Northtrop Frye compare a society that does not have an understanding of history to a person suffering from advanced senility. The past is what we use to guide our course.

At 1/04/2009 7:49 AM, Anonymous Anonymous said...


Your psuedo-type MBA comprehension skills need some upgrading. Perhaps MP could assist you with a correspondence course from Michigan.

Quoting from the Furniture Brands FTZ application:

The proposed scope of authority under FTZ procedures would only involve duty savings on foreign origin, micro-denier suede fabrics(classified under HTSUS Headings 5407, 5512, 5515, 5516, 5903, 5906, 6001, 6005, 6006; duty rate range: 2.7-17.2[percnt]) finished with a caustic soda wash process, which the applicant indicates are not produced by U.S. mills. The application indicates that Lane does not seek FTZ benefits on any of the other foreign fabrics used in production at the facilities (i.e., full duties would be paid on all such fabrics). All other material inputs used in production would be domestic-status.

To suggest that 950 "Cut-and-Sew" jobs at the 3 plants in FTZ Mississippi will be saved or created due to a $5 million annual duty-free savings is an absurdity.

Social justice my ass. The duty savings will flow straight to the plant's bottom line.

At 1/04/2009 1:46 PM, Anonymous Anonymous said...

January 4, 2009

FEDERAL PAY RAISES: Pay hikes show what Congress thinks of American workers

Remember, during the whole debate over a bridge loan for auto companies, how members of Congress kept saying autoworkers are overpaid? Some U.S. senators and representatives claimed United Auto Workers members were knocking down $73, even $75, per hour.
That led federal lawmakers, like U.S. Sen. Bob Corker, R-Tenn., to call for a cut in pay for auto workers as a condition of the "bailout."
It turns out the figure was wildly wrong. You can only get to figures that high if you include all kinds of things not typically considered wages — health care, benefits, vacation time, pension costs, retirees' health care, etc.
The real average hourly wage for a United Auto Workers carmaker, straight time, comes out to something between $28 and $30 an hour. UAW President Ron Gettelfinger testified before Congress that average pay for assemblers in the auto plants is $28 per hour. General Motors Corp. recently told The Associated Press that the average UAW laborer earns $29.78 per hour.
Hey, that is pretty good pay. A worker making those wages and working full time all year would get $58,240 or $61,942 annually, depending on which number you use.
Yeah, that's a decent living. You won't get rich making that kind of money, but it is pretty good pay.
Still, it is a far cry from the $169,300 that U.S. senators and representatives were paid this year. If Congress members really work 40 hours a week for 52 weeks out of the year (and they don't), it is well over the $73 per hour rate they so objected to. It would in fact be more than $81 per hour, and that's not counting their benefits, their health care or their pension costs.
What's more, lawmakers are going to get a raise. Yup, that $81 an hour isn't good enough for them. They deserve more. Come January, U.S. senators and representatives get an additional $4,700 in their yearly paycheck, bringing their annual haul to $1 74,000. Assuming again, a 40-hour week for 52 weeks, that pay rate comes to a whopping $83.65 per hour.
So let's make sure we have the logic correct — people who actually build things, in this case automobiles, deserve a pay cut from their $29.78 an hour ... it is lawmakers who deserve a boost in pay to $83.65 an hour ... for getting their facts wrong when they debate issues, like how much autoworkers get paid.
Now, one could argue that pay ought to depend on how good a job you've done, and since the auto companies are in trouble, maybe the auto workers do deserve cuts. That would be rather callous. It would ignore a lot of facts about how the economy has turned and automakers were caught off guard, but you could make that argument.
So has Congress done a good enough job to deserve a raise? In this last term, it has presided over an economy that has melted down. That is largely the result of a regulatory system described as being in shambles. The only reason the federal government isn't facing bankruptcy itself is that it can just run up the federal deficit. Unlike GM, Chrysler LLC and Ford Motor Co., which have to balance their budgets eventually, the U.S. government can just print more money.
The economic pain these days goes well beyond autoworkers. People a re losing their jobs. People are losing their homes to foreclosure. People who have invested in stocks and in their houses have seen billions of dollars worth of value simply evaporate.
And congressmen are taking a pay hike.
They've actually outdone Marie Antoinette. She said, "Let them eat cake."
Congress says, "Let them take pay cuts."


At 1/04/2009 5:07 PM, Blogger QT said...


Time to check your local community for anger management courses or contact the local veterinary for a distemper shot.

All of us are capable of a few cheap shot insults. The issues however, remain.

1. You have stated that "Eliminating the tariff in a specious free trade zone (FTZ) puts other domestic furniture manufacturers at a competitive disadvantage." However you have also told us that "previously, the Mississippi furniture manufacturers could import the specific micro-denier suede fabric entire roll with a tariff or import the cut pieces without same." If the fabric can be purchased pre-cut, duty-free by competitors, is the competitive disadvantage material?
2. Although this fabric is not manufactured in the U.S., the product directly competes with other U.S. made upholstery fabric. The existing tariff structure protects the U.S. textile industry from foreign made bolt cloth. The link you posted was from the American Textile Association indicating concern at the precedent being set by a fabric being exempted from the tariff.
3. From last link: "The Lane facilities (3,300 employees) are located in three sites
within FTZ". The # of jobs involved is 3,300. You have not presented any information about potential job losses due to the FTZ (for either furniture or textile industries) and your post states that other furniture makers can buy the same foreign made fabric in pre-cut form "without" paying the duty. Where did I say that 950 jobs would be on the line? Oh, yeah, I didn't.

You have stated that the tariff saved will go to the bottom line. Doesn't that mean that the company will have a greater capital base not only for investment but to improve the company's chances of surviving the most serious financial downturn in the last 50 years. Earlier in this tread, you were trashing Dr. Perry for not taking this crisis seriously enough. You can't have it both ways.

I am perfectly willing to consider the benefits of this tariff but you have not presented any. I am perfectly willing to consider the negative repercussions of the FTZ but have seen very little to indicate significant potential for job losses or a significant commercial disadvantage for competitors.

I am fully prepared to accept a better argument but so far, you have not presented a compelling case against the FTZ.

At 1/04/2009 5:20 PM, Blogger QT said...

"opposing the applications due to the precedent it would set as textile products have historically been excluded from the FTZ program. Furthermore, approval of the applications would put U.S. producers of competing upholstery fabrics at a disadvantage."

From your original link, it isn't about competing furniture manufacturers but the textile industry. Helps if you actually read the stuff you post.

At 1/05/2009 8:48 AM, Blogger Dominic said...

O Bloody Hell
Thank you for your comment.
I further blather:
When will the US stop supporting Third world countries, where we raise their standard of living at the expense of US Tax payers.
When will we insist on Fair Trade!
We import 1.2 million Korean cars and they buy 25,000.

If I may ask, what do you do for a living?

At 1/05/2009 3:02 PM, Blogger QT said...


Just curious. What definition are you using for third world country?
The economy of South Korea is a highly developed trillion dollar economy that is the fourth largest in Asia and 13th largest in the world. It is considered to be one of the world's most successful economies, which sustained double-digit economic growth for decades, growing faster than any other major economy in the 20th century.

With a population of 49 million, a very small land base and an extensive transportation network, it is hardly surprising that auto imports are substantially less than the U.S. with 306 million (2009 estimate per Wiki) and the largest automobile market in the world.

One imagines that you cannot possibly be referring to North Korea since trade flows almost completely in one direction, namely exports to N. Korea rather than imports.

You have stated the number of cars exported/imported. Would appreciate if you could provide a link for this information.

At 1/06/2009 3:46 PM, Blogger Dominic said...

I read it somewhere but cannot located it. Since I work as an automotive parts supplier and ship all over the world, I was concerned about Duty and Taxes added to my parts. I was frustrated and started to "blather". Check out how S. Korea has become a major economic force by limiting their imports.

At 1/06/2009 7:08 PM, Blogger QT said...


It helps to understand your concerns about the existing tariff structure affecting your industry. The second link did not take me to any information about South Korea.

The Asian tiger economies seem to have embraced mercantilism in trade opting for protective tariffs on certain industries. (protective tariffs for you but free trade for me) I suppose from their point of view, they are afraid that their businesses would not be able to effectively compete against U.S. multi-nationals. Many countries fear free trade with the American giant.

The free trade accord with South Korea makes progress on the automotive front with a suspension of the 8% duty on U.S. autos. Hopefully, this measure will also apply to automotive parts.

I am presently reading "Spin Free Economics". Excellent break from the partisan mythologies of both left & right. A few points to consider:

One of the facts that we seldom consider is that in the 20th century, worldwide GDP increased fivefold; no other century comes close to this. Poverty in the U.S. has gone from 50% of all families in 1900 to between 10-15%. These improvements have come in spite of 2 world wars and the worst economic depression in human history largely due to international trade. In a survey of more than 1,000 economists, 94% felt that tariffs and import quotas usually reduce the general welfare of society.

All the best in 2009.

At 1/06/2009 8:49 PM, Blogger QT said...


We all get frustrated particularly when the issue is important to us.

Let us set aside the word "blathering". Such terms seem to put down the speaker only creating further frustration.

When you tell me what it is that concerns you ie. protective tariffs from other countries, that makes sense to me. No blathering there.


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