With apologies to Joss Whedon: Into every generation a truly moronic trade policy is born: one completely counterproductive idea in all of America, a chosen one. This policy alone will wield both the stupidity and the political opportunism required to undercut both the U.S. economy and American foreign policy. It is the Nickelback of trade policy.
To clarify: most “fair trade” policies are imperfect, but most of them at least do a passable job of trying to address the concerns of a decent swath of Americans. Every 20 years or so, however, there is a trade policy that is so galactically stupid that whatever meager benefits it brings to one group is wiped out by the massive but hidden costs to everyone else. I am talking about trade policies that are so bad that mercantilists and free-traders can agree that they are dumb.
In the 1980s, it was the Reagan administration’s voluntary export restraints (VERs) applied to Japanese automobiles. That move offered a temporary benefit to Detroit’s Big Three, but mostly imposed costs. Consumers had to pay higher prices. Furthermore, because the VERs were quota-based, they helped pave the way for Japanese automakers to move into the luxury brands. In other words, VERs generated a temporary benefit to Detroit manufacturers, hurt consumers, and paved the way for Japanese auto firms to eat into Detroit’s bread and butter.
In the early 2000s, it was the idiocy that is this country’s approach to trade in sugar. As I wrote in U.S. Trade Policy: Free Versus Fair:
U.S. import quotas limit the amount of sugar the United States imports. As a result, U.S. sugar prices are 350 percent higher than world market prices….