By Kevin D. Williamson
Friday, December 06, 2019
Switzerland is the world’s second-most-prosperous country
in gross terms, with a GDP/capita of $82,950 in 2018 — about 30 percent higher
than U.S. per-capita output. Only tiny Luxembourg exceeds it, as the IMF runs
the numbers.
Switzerland has a very capitalistic, free-trade economy —
only Hong Kong, Singapore, and New Zealand outrank it on the Heritage
Foundation’s Economic-Freedom Index. But Switzerland does maintain some modest
tariffs on imports. (Switzerland has relatively low taxes, but there are lots
of them, including a very small wealth tax, the Swiss being one of the few
nations that have figured out how to effectively administer one.) And
it is getting rid of a lot of those tariffs, because they are a burdensome tax
on Swiss people, who already pay very high prices in general. From Bloomberg:
Switzerland is pressing ahead with
plans to eliminate import tariffs on industrial goods, a bid to combat the
country’s high prices.
The government will submit a draft
law to parliament after getting positive feedback on its proposal, which it
initially presented a year ago. Goods like cars, bicycles, shoes and textiles
would be affected.
The move will allow companies to
benefit from lower input costs and therefore enhance profitability, the
government said Wednesday.
Focus on those “lower input costs” for a moment. There is
a great deal of trade that does not consist of finished goods but raw materials
and components instead. The protection racket that Senator Rubio maintains on
behalf of Florida’s sugar interests helps to protect a few firms that are
influential in Florida, but the policy imposes higher sugar prices on everybody
else, including the thousands and thousands of U.S. companies that buy sugar
for the goods they produce.
The Trump tariffs already
have driven one U.S. steel firm into bankruptcy (U.S. steel companies
import and process scrap from abroad, a once-lucrative business that has been
undermined by the tariffs) and exerted
general downward pressure on the performance of the U.S. steel industry as a
whole: Steel stocks have declined
on average about 1 percent in 2019, while the S&P 500 gained 25
percent. U.S.
electronics manufacturers such as Misco have seen their businesses gutted
by higher prices on imported components.
Switzerland’s tariffs already were pretty modest,
averaging about 1.7 percent on non-farm goods. (Like many European countries,
Switzerland engages in robust agricultural protectionism, particularly for
dairy goods. Eleven farmers in Gruyères rejoice.) But with prices on consumer
goods, industrial inputs, and labor already high (the average wage is
about $90,000) a little bit of savings could prove significant. But what is
most instructive here is that Bern at least is clear about what a tariff is — a
sales tax — and about who pays it: consumers and domestic businesses, mostly.
Would that we would learn the same lesson.
The
Federal Reserve has found that in the case of China, Trump’s tariffs are
overwhelmingly being paid by U.S. consumers and businesses in the form of
higher prices and lower profits. President Trump likes to brag about the
billions of dollars the Treasury is collecting in tariffs. What he does not say
is that this is from an enormous tax increase on Americans, one that has
especially disadvantaged many of the very manufacturing firms that this policy
purportedly was supposed to help.
A more general lesson is that the benefits of trade come
on both sides of the ledger. In spite of our absurd political rhetoric,
Americans are not worse off because all of the world’s producers endeavor to
bring their very best goods and services to our doorsteps at competitive
prices. That should be obvious enough, but even self-evident truths have to be
reiterated year after year.
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