Tariffs Nobody Wants

Jun 28, 2010

// 20 July 2010 update here.

Here's an interesting question: Why does the United States levy tariffs on imported goods that U.S. manufacturers and consumers need...but that aren't even produced domestically? It may not make sense, but it happens all the time:

Exhibit 1: Congress has been unable to move the Miscellaneous Tariff Bill (MTB), which provides "a three-year tax moratorium on the importation of chemicals, dyes and other non-domestically produced components used by companies during the manufacturing process," according to Roll Call.

That's right - "non-domestically produced." Since the last MTB expired at the end of 2009, the United States is levying significant tariffs on inputs and components that U.S. manufacturers need but that aren't even made in the United States.

The Roll Call article adds: "According to Congressional guidelines provided to Roll Call, all tariff suspension requests go through a lengthy vetting process that susses out whether there are any domestic producers of the materials and whether the tax suspension will cost less than $500,000. The requests are reviewed by the White House, Congressional Budget Office, the U.S. International Trade Commission, the U.S. Customs and Border Protection and the U.S. Trade Representative's Office...

"'MTBs are not earmarks - they are, first and foremost, jobs bills,' Matthew Beck, a Democratic Ways and Means spokesman, told Roll Call. 'In the past, MTBs have received strong bipartisan support because they support American businesses and jobs. In fact, a recent study estimates that the MTB provisions under consideration by the House would increase U.S. production by $4.6 billion, expand GDP by $3.5 billion and support roughly 90,000 jobs.'"

Exhibit 2: While the Congress's failure to approve the MTB is incredibly frustrating, there is building momentum for another piece of legislation - the Affordable Footwear Act.

As explained by the American Apparel & Footwear Association (AAFA) at www.endtheshoetax.org, this legislation "seeks to remove regressive and punitive import duties, commonly called the 'shoe tax,' on a range of shoe types popular with today's consumers, particularly lower- to moderately-priced footwear and children's shoes."

The "shoe tax" ranges as high as 67.5%. As Ed Gresser, President of the Progressive Policy Institute, writes in "Toughest on the Poor: Tariffs, Taxes, and the Single Mom," this is all too common: "Tariffs are highest on the goods important to the poor."

According to AAFA, "this Affordable Footwear Act is not controversial -- imports account for 99% of all shoes sold in America, and the few remaining domestic footwear producers do not oppose the legislation... The depression-era shoe tax originated in the 1930 to protect a manufacturing sector that no longer exists today."

The administration's goal of doubling U.S. exports within five years is one the Chamber supports, but it's worthwhile to remember the significant benefits imports bring as well. As the Chamber reported in our State of World Trade report last month, "imports bring lower prices for American families as they try to stretch their budgets. They expand choices and competition in the marketplace. Imports give us access to products that would not otherwise be available - such as fresh fruit in the winter."

The Chamber supports the Affordable Footwear Act and the Miscellaneous Tariff Bill. We urge Congress to approve these sensible bills swiftly.

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