The next bucket of crispy fried chicken you take home may soon cost more for your family. That’s because the whole kit and caboodle—the chicken and the bucket—are central players in a burgeoning trade war that would best be averted.
Major chicken producers in the United States have been rocked by the notice that Chinese officials are investigating whether products have been illegally subsidized in the United States.
If the Chinese levy a tariff to make the chicken more expensive, it will fry prices overseas and reduce demand—creating a pressure cooker that will drive up domestic prices.
The Chinese, meanwhile, appear to be using the move as a political warning to the U.S., which has been only too willing under the Obama administration to consider costly tariffs on foreign goods in the name of protecting unionized jobs here.
The American products potentially receiving “protection” include everything from tires to a few chemicals to ironing boards to paper. It’s the last one, coated paper,that makes up some chicken buckets. It was just weeks ago the Obama administration took another step toward imposing permanent tariffs after slapping temporary levies of 10 to 135 percent on pulp and paper products from India and China.
Here’s the part that will burn the buttermilk biscuits of even a US-jobs-first consumer: in both China and America, it is special interests pushing both governments toward a trade war.
In America, those special interests include organizations dubbed by a new report as the “Empires of Collusion”—international green activist groups like Greenpeace and WWF, the United Steelworkers, and paper and pulp companies with names most of us don’t know (such as Sappi, NewPage, and Appleton).
The latter two groups have actually gone back for seconds on the trade complaint after having a similar lobbying effort mashed a few years ago. Then, the government concluded that domestic industry had not been harmed by unfair actions elsewhere. Another administration may see the world differently, so this next attempt is too early call.
This sort of concerted anti-trade campaign has already been served up down under, so we know how hard it is to swallow for consumers. A 2010 report from the Australian think tank Institute of Public Affairs found that collusion between the usual suspects—a few paper companies, a large domestic labor union, and Greenpeace and WWF—raised prices on toilet paper by 42 percent. That’s money that consumers will have to waste based on activist-driven government mandates.
It’s not just consumers who are harmed, though. Protectionism is quite bitter for the developing world and its most vulnerable people. Consider: The International Monetary Fund found that for developing nations, opening up their economies to the global market has been essential to cultivate competitive advantages in the manufacture of certain products. In those nations defined by the World Bank as "new globalizers," the number of people in absolute poverty declined by over 120 million (14 percent) between 1993 and 1998.
Or: The United States Trade Representative has stated, “Studies show that openness is linked to key macroeconomic and governance policies that enhance growth.” It has also pointed to a World Bank study that found developing nations receive about two-thirds of the potential benefits of eliminating distortions in important markets such as agriculture.
We know that protectionism driven by activists and a few special interests makes it more expensive for consumers and harms the world’s poorest. We also know the key to long-term global prosperity is getting bureaucrats out of the way so that free enterprise can allocate resources—chicken, paper, or ironing boards—most efficiently to provide the highest degree of economic growth.
That knowledge also compels us as consumers to tell protectionists to quit their costly collusion. That way we can transition from a too-costly bucket of chicken to just desserts.
Andrew Langer is president of the Institute for Liberty and a spokesman for the Consumers Alliance for Global Prosperity.