Tariffs on Furniture Trade: Example of Mercantilist Policy Failure

In the eyes of mercantilists, the world operates in a fixed pie where trade is reduced to a zero sum game—one benefits at the expense of the other.

Because it is a zero sum game, for mercantilists, trade has to be controlled to favor the locals.

And one of the conventional route for this is via protective tariffs.

The Washington Post gives an account of how recent tariffs imposed on the furniture trade with China, has resulted not to the benefits of Americans, but to politically affiliated lobbyists.

The WaPo reports, (hat tip Mark Perry) [highlights mine]

The United States and China have exchanged accusations of dumping for years and imposed tit-for-tat duties. All along, though, China has generally come out on top: Its trade surplus with the United States rose to $273 billion in 2010, according to U.S. Census Bureau figures, more than three times the level of a decade earlier.

The trade concerns have led to growing calls for tougher action from Washington to stem the tide and protect U.S. jobs. But do tariffs work? In the case of bedroom furniture, they’ve clearly helped slow China’s export machine. In 2004, before tariffs went into force, China exported $1.2 billion worth of beds and such to the United States. The figure last year was just $691 million...

“This whole saga is a perfect example of good intentions gone completely haywire,” said Keith Koenig, president of City Furniture, a big Florida-based retailer and critic of the tariffs. Like many retailers, he relies on imported goods, which are cheaper than those made in America.

The only Americans getting more work as a result of the tariffs are Washington lawyers, who have been hired by both U.S. and Chinese companies. Their work includes haggling each year over private “settlement” payments that Chinese manufacturers denounce as a “protection racket.”

This whole saga is a perfect example of a longstanding myth debunked since the 18^th century.

First of all, people buy and sell voluntarily because they see fulfillment from such activity. And no territorial boundary changes such dynamics.

Next, mercantilism signifies a form of mental heuristics, only justified by the use of mathematical models, which essentially ignores human action.

Mercantilist see people as behaving like robots or automatons especially in the lens of statistical aggregates.

They omit the fact the people will work their way around absurd policies. And that’s why economic theories which support these policies are exploded as the above.

This is especially amplified in today's deepening of globalization trend as more avenues are made available to circumvent nonsensical policies.

As Ludwig von Mises wrote,

All that a tariff can achieve is to divert production from those locations in which the output per unit of input is higher to locations in which it is lower. It does not increase production; it curtails it.

Lastly mercantilism sells to either economic ignoramuses or to ideological zealots which sees the state as an omni-virtuous entity.

The latter hardly realizes that the state is composed of acting humans, who also operates on the premise of self-interests.

The key difference is that these entities use the power of gun (coercion) to exploit the masses from which to attain their personal goals.

The followers of mercantilism also hardly realize that they serve as pawns to unscrupulous political masters and the crony clients, who benefit from politically unequal policies in the name of the upholding the public’s weal.

Mercantilism is like a superstition which simply refuses to go away.