Tariffs in disguise bad for consumers

 

Generally speaking, the more information the better. But not always. That's why Congress was right to abolish the "country of origin labeling" (COOL) regulations for meat last month. Those rules were never really about important consumer information; rather, they were essentially a backdoor tariff.

"Disguised as a way to help consumers, the COOL law was actually designed to protect a small segment of the U.S. cattle industry at the expense of everyone else," explained the Cato Institute. "But as this unfortunate episode comes to an end, it's important to remember that disguised regulatory protectionism remains a major problem in the United States."

In the old days, industries would push for tariffs. But most modern politicians are at least nominal free-traders.

"There's a broad consensus among economists and intellectuals that trade barriers harm our economy," Cato pointed out. "Still, our government is run by politicians who will always be willing to sacrifice the good of the public to help special interests."

So how do industry groups get the trade protection they want? One way is through labeling schemes. After all, who could object to requiring manufacturers to add a simple label? It might even give consumers important information they wish to know.

"This dynamic where altruistic motivation meets rent-seeking cronyism can be a powerful driver of public policy," Cato added. "And when the biggest losers are foreign businesses, there's very little organized resistance. The consequences of disguised regulatory protectionism are the same as imposing tariffs - higher prices and less variety for consumers, less opportunity and lower wages for workers."

Here's an example.

"American consumers rely on ‘Dolphin Safe' labels to ensure that their tuna purchases don't contribute to harmful fishing practices," Cato explained. "By defining what ‘dolphin safe' means, the federal government ostensibly ensures that the label is reliable. In reality, the regulations benefit three major U.S. tuna companies by making it nearly impossible for their Mexican competitors to sell tuna in the United States."

There's a double standard in the reporting requirements. U.S. companies don't have to meet the high reporting and verification standards companies from other countries do.

"The law actually makes it illegal to provide consumers with information that some special interests don't want them to have," Cato noted.

Supporters of the COOL regulations often cite consumer safety.

For example, U.S. Rep. Rosa DeLauro, D-Conn., claimed: "Americans will no longer know where their meat is born, raised and slaughtered … This is bad public policy and bad for food safety. We should not let trade agreements change our rigorous standards. Informed choice is a bedrock principle of the free market."

But the labeling had nothing to do with food safety - merely country of origin. Meat producers in other countries are subject to the same sanitation and safety regulations they were subject to before the COOL rules were repealed.

What's more, there's nothing preventing U.S. producers from attaching "Grown in America" if they wish.

COOL rules really served only to give a governmental boost to some companies over others. That's bad for consumers.

 
 

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