No. of Recommendations: 7
Mungofitch writes a nice comprehensive comparison of Tariffs, a sales tax on imported goods, vs VAT. More or less.
Mungofitch, I think you made a bit light of the importance of producing strategically important goods domestically. Yes, if its wine you purely import you might get thirsty. If it is the chips that give your military a strategic advantage, then you are going to be a lot worse than thirsty.
But there is another effect that I don't believe is contemplated by the comparative advantage theory.
When we have an import from an economy who's "comparative advantage" consists of paying their laborers much less than we pay ours, that's just fine as long as we can move our workers to some other tasks. And classic capitalism says it is the displaced worker's problem to learn something that allows them to participate in whatever higher value added pursuits our society engages in that supports our higher wages. But what seems to have happened in fact is that we have simply thrown our lower skilled worker's to the wolves, that is, they have to compete against super low payed competition in other countries and other continents.
And the thing that may make the comparative advantage theory an incomplete analysis of the problem is, in our modern country and economy, we spend money on displaced or underemployed workers when they are underemployed.
So really, by NOT having a tariff, by not having a tax on the low-cost foreign producers, we are subsidizing their low cost of production by paying the costs we have associated with underemployed low-skilled domestic worker so that they can sell their stuff at high-profit/low-price to us.
So really? We are supposed to subsidize low-cost the owners of foreign businesses using low-cost labor so we can avoid the "mistake" of putting a tariff on them?
If those underemployed workers are going to cost our society money by being underemployed, it seems quite sensible to put at least enough of a tariff on the foreign companies so that we are not net-subsidizing their businesses by socializing the cost of the undermployed workers. It would seem the money we spend on undermployed workers is an externality to having zero-tariffs on low-cost foreign producers.
If we offset carbon with a fee or tax, why not offset really low wages with a tariff?
Anyway, that's what I've been wondering about.
R:
