Pity poor Cambodia. The impoverished nation -- where
the average income is just $260 a year -- paid more in tariffs for its
modest exports to the United States last year than the export powerhouse
of Singapore, which has a per capita income 100 times higher.
Similarly, Bangladesh was taxed slightly more highly
on its exports by the U.S. Treasury than France, which exports 15 times
as much to America. Just looking at the numbers that drive the U.S. tariff
schedule should be enough to prick the social conscience of anyone who
isn't a lobbyist for the American textile industry. Those numbers show
that the U.S. taxes poor -- and often Asian -- trading partners far more
dearly than their more prosperous Western counterparts.
This is hardly news to free-trade devotees. More than
a decade ago, American journalist James Bovard scornfully noted in "Fair
Trade Fraud" (Palgrave, 1991) how mink furs and lobsters had duty-free
access to U.S. markets, while polyester sweaters and infant food preparations
were taxed at 34.6% and 17.2% respectively.
But now, and from a surprising source, comes a riveting
17-page analysis of U.S. tariff inequities -- "America's Hidden Tax
on the Poor" -- written by Edward Gresser. Mr. Gresser worked for
U.S. Trade Representative Charlene Barshefsky in the administration of
former U.S. President Bill Clinton, and now analyzes trade policy at the
Progressive Policy Institute. PPI is the think tank for the centrist Democratic
Leadership Council, which is the pro-trade wing of the Democratic Party.
(Yes, such Democrats do exist if you search hard enough in Washington.)
Mr. Gresser's analysis hasn't yet received much attention
in the U.S. press. But insiders have perked up, recognizing that this
is going to resonate powerfully with the poorer members of the World Trade
Organization. Third World countries look to the recently launched Doha
round of trade liberalizing talks to eliminate high tariffs that rich
countries impose on products predominantly imported from the developing
world. Indeed, WTO Director General Mike Moore has already begun trumpeting
Mr. Gresser's numbers.
In the Cambodian case, these show the Asian nation paid
over $152 million to the U.S. Treasury last year on exports of $964 million
-- amounting to a 15.8% tax. But prosperous Singapore (which has a per
capita income of $30,170) paid only $96 million in tariffs on $14.8 billion
in exports -- a tax of only 0.6%.
Bangladesh (which has a per capita income of $370) exported
$2.3 billion to America, which fattened Uncle Sam's coffers to the tune
of $331 million -- a 14.1% tax. Meanwhile, France exported $30 billion
to the U.S. but paid only $330 million in tariffs, because its goods were
taxed at an average rate of only 1.1%.
Even struggling Mongolia, which sold Americans a pitiful
$143 million worth of goods, paid $23 million in tariffs and was taxed
at 16.1%. Meanwhile, Norway paid only $24 million in tariffs on its $5.1
billion in exports -- a tax rate of 0.5%. The situation is much the same
for other poor Asian nations like Sri Lanka and Nepal, whose exports to
the U.S. are taxed at 14.1% and 12.3% respectively.
"On average, the world's least-developed countries
pay tariffs four or five times higher than the richest economies,"
Mr. Gresser notes. "One need not adopt the theory popular in India
-- of a deliberate conspiracy against the poor -- to consider this a remarkable
inequity."
The reason for this inequity is that poor countries
sell Americans products such as shoes and clothing, which are taxed on
entry into U.S. ports at an average rate of more than 11%. In some cases,
the tax is as high as 30% or even 40%. Tariffs on shoes and clothing were
only 6.7% of all merchandise imported into the U.S. in 2001. But they
accounted for $8.7 billion of the $18.6 billion in tariff revenues collected
by U.S. Customs -- nearly half of all tariffs collected.
By contrast, rich countries tend to sell Americans high-end
products like computers, electronics and civil aircraft that are hardly
taxed. Overall, half of the 10,000 U.S. tariff lines are zero, leaving
America's effective average tariff at 1.6%. Exclude shoes and clothing
and it's 0.9%, Mr. Gresser calculates.
The U.S. tariff schedule hits poorer Americans hard.
Women who buy underwear at Wal-Mart pay for the privilege. Tariffs on
the cheap man-made fiber panties that Wal-Mart offers lower-income consumers
are a stiff 16%. But at upscale retail outlets like Bloomingdale's, wealthier
women buy silk panties taxed at only 2.4%. Over in the men's shirts department,
the disparity is even greater. Men's knitted shirts made of cheaper man-made
fiber are taxed at 32.5%.
The U.S. tariff schedule also hurts babies who were
not born rich. "Tariffs for artificial fiber goods run all the way
up to 23% and 29%, with cotton somewhat lower, and silk or silk blend
close to duty-free," Mr. Gresser observes. Tariffs on baby clothes
raised nearly $200 million in revenue for the U.S. Treasury last year.
Poorer Americans are also taxed heavily for their food.
Because of high tariffs, consumers pay dearly for the sugar they put on
their breakfast cereal, the concentrated orange juice they drink, peanut-butter
sandwiches, and so on. Meanwhile the rich continue to tuck into their
duty-free lobsters.
Of course, the cruelest inequities are felt in the poorest
villages, whose voices are seldom heard in sophisticated international
trade circles. But now, free traders have another surprising ally.
Oxfam International -- the British-based nonprofit advocacy
group that has been associated with the antiglobalization camp -- has
realized that international trade can be a powerful engine for increased
global prosperity. Oxfam recently issued a blistering 274-page report
that attacks the rich countries' tariff barriers on clothing produced
in places like Cambodia and Bangladesh.
Oxfam has also taken direct aim at another priority
of developing countries in the WTO's Doha negotiations: reducing farm
subsidies that the U.S., Japan and Europe inflict upon the world's food
markets. The scale of the problem has just increased still further, after
U.S. President George W. Bush signed into law Monday a bill that will
increase subsidies to American farmers by 80%.
"Rich countries spend $1 billion every day on agricultural
subsidies," Oxfam fumes. "The resulting surpluses are dumped
on world markets, undermining the livelihoods of millions of small holder
farmers in poor countries."
Overall, the poor nations "face tariff barriers
that are four times higher than those encountered by rich countries,"
Oxfam estimates. "These barriers cost them $100 billion a year --
twice as much as they receive in aid."
To be sure, Oxfam still has only one foot in the door
of Adam Smith and David Ricardo. The organization's report expresses little
awareness that poor countries also remain mired in poverty in large part
because of their own domestic protectionist polices aimed at benefiting
local businesses and political elites. Still, Oxfam's decision to launch
a three-year campaign targeting the protectionist policies of rich countries
gives the poorer WTO members a valuable ally in the Doha talks, as does
Edward Gresser's study for centrist U.S. Democrats.
The U.S. and other rich countries are unlikely to give
up on discriminatory tariff practices without a fight. As Mr. Gresser
knows, the Clinton administration that he served wasn't exactly known
for a willingness to stand up to U.S. protectionist lobbies. Alas, the
same special interests currently hold great sway in Mr. Bush's Washington,
as shown by his decision to sign the farm bill, reversing six years of
efforts by some U.S. Republicans to wean American farmers away from huge
government subsidies.
So there is going to be a fight. And in the Doha round,
the poor countries will be basically saying to the rich what former U.S.
President Ronald Reagan once said at the Berlin Wall -- tear these barriers
down.
