Great topic, Peter, and timely. As always, you provide data to substantiate every point of your discussion - a very intelligent and impressive feature I see in few other Substacks, so, thank you! I also agree with your ‘it depends’ assessment.
Policy-makers forget that any attempt to get around free-market mechanisms inevitably results in…
Great topic, Peter, and timely. As always, you provide data to substantiate every point of your discussion - a very intelligent and impressive feature I see in few other Substacks, so, thank you! I also agree with your ‘it depends’ assessment.
Policy-makers forget that any attempt to get around free-market mechanisms inevitably results in ‘unintended consequences’. With tariffs, you risk increases in smuggling, buying and selling on the black market, and the organized crime that prospers as a result. So, tariffs have to be thought through and applied carefully. For example, If Trump plans to Impose a high tariff on Chinese silicon chips, he could first notify domestic chip manufacturers, then give them tax credits to spur initial domestic investment, and wait to impose the tariffs until domestic manufacturers are just about up and running. Or, he could negotiate a deal with Mexico that would result in chip manufacturing there, in exchange for their increased vigilance against illegal immigration at the US/Mexico border. The key is: think it through!
And then there is the problem of increased bribery. The US doesn’t have a culture of bribery, so we forget that much of the world runs on bribery. The last time you went to get your driver’s license renewed, it didn’t even occur to you to offer a bribe to the DMV, right? That is not the case in many of the countries we do business with, and we certainly don’t want to enable a bribery-oriented business climate here!
This reminds me of an article I read in the Wall Street Journal forty years ago (back when it was still real journalism). The article was an assessment of which cities were the most expensive for western businessmen to visit, and usually it came out that Tokyo, New York, or London was most expensive. But this particular year, Lagos, Nigeria was the most expensive! Puzzling - until you looked at all of the bribes you had to pay. Any western businessman was assumed to be rich, so he or she was hit up for a bribe at every step of the visit. You had to pay a bribe to get off the plane, a bribe to enter the terminal, a bribe to retrieve your luggage, a bribe to get a taxi, and so on, all day long.
Great topic, Peter, and timely. As always, you provide data to substantiate every point of your discussion - a very intelligent and impressive feature I see in few other Substacks, so, thank you! I also agree with your ‘it depends’ assessment.
Policy-makers forget that any attempt to get around free-market mechanisms inevitably results in ‘unintended consequences’. With tariffs, you risk increases in smuggling, buying and selling on the black market, and the organized crime that prospers as a result. So, tariffs have to be thought through and applied carefully. For example, If Trump plans to Impose a high tariff on Chinese silicon chips, he could first notify domestic chip manufacturers, then give them tax credits to spur initial domestic investment, and wait to impose the tariffs until domestic manufacturers are just about up and running. Or, he could negotiate a deal with Mexico that would result in chip manufacturing there, in exchange for their increased vigilance against illegal immigration at the US/Mexico border. The key is: think it through!
And then there is the problem of increased bribery. The US doesn’t have a culture of bribery, so we forget that much of the world runs on bribery. The last time you went to get your driver’s license renewed, it didn’t even occur to you to offer a bribe to the DMV, right? That is not the case in many of the countries we do business with, and we certainly don’t want to enable a bribery-oriented business climate here!
This reminds me of an article I read in the Wall Street Journal forty years ago (back when it was still real journalism). The article was an assessment of which cities were the most expensive for western businessmen to visit, and usually it came out that Tokyo, New York, or London was most expensive. But this particular year, Lagos, Nigeria was the most expensive! Puzzling - until you looked at all of the bribes you had to pay. Any western businessman was assumed to be rich, so he or she was hit up for a bribe at every step of the visit. You had to pay a bribe to get off the plane, a bribe to enter the terminal, a bribe to retrieve your luggage, a bribe to get a taxi, and so on, all day long.
We don’t want that.