June 22, 2010
Government programs don’t have to have a big budget to do big harm to the economy. For example, the Department of Commerce’s International Trade Administration “only” costs taxpayers $400 million a year, but its protectionist activities impose a substantial burden on consumers and the economy.
The Washington Post recently reported on the last remaining ironing board manufacturer in the U.S. – a 200 employee plant in Seymour, Indiana. Domestic manufacturers have disappeared because they weren’t able to compete with lower-cost imports from China. In 2003, Chicago-based Home Products International, which owns the Seymour plant, successfully petitioned the government to impose tariffs of up to 157 percent on Chinese ironing boards.
It was the International Trade Administration’s job to determine whether Chinese exporters were “unfairly” dumping ironing boards on the U.S. market at below cost. However, to arrive at this conclusion the ITA calculated costs in China based on those in India because getting accurate Chinese data was apparently too difficult.
As a Cato essay on the International Trade Administration explains, the agency’s methodology is highly suspect:
The ITA must determine if a good is priced below similar goods in the home market or below the cost of production. That might sound straightforward, but there is no accurate way to do such price comparisons in the real world…ITA investigations are biased in favor of domestic industries that bring complaints. One reason for that is the lack of transparency in the agency’s decision-making process. Cato scholars Brink Lindsey and Dan Ikenson argue: “Antidumping law is notoriously complicated, and its inner workings are known only to a select handful of users, targets, bureaucrats, and lawyers. As a result, most supporters of the law simply take its appealing rhetoric at face value.”
While the ITA’s findings may have helped the 200 employees in Seymour, it has hurt millions of U.S. consumers by forcing them to pay higher prices for ironing boards. It also hurts the retail businesses and their employees who are effectively forced to purchase the ironing boards from Home Products International.