Free Markets, Free People

The folly of green protectionism

Here’s a formula for you to study:

Green groups want less forestry in the developing world. Industry wants green protectionism to cut the volume of competitive imports. Unions want green protectionism to stop imports to ensure they can keep workers in high-paying jobs.

So using the environment as an excuse, we have these three groups colluding to further their own agendas. Call it “green protectionism”.

In a recent case it has been to keep toilet paper made in foreign countries out of Australia.

That’s right, toilet paper.

Can anyone now figure, based on that formula, what the missing part of the equation might be? The part that is necessary to make such collusion pay off?

Yes, government. Certainly green groups can want less forestry in the developing world, and industry can wish for a way to cut the volume of competitive imports. And unions always hope to ensure high paying jobs.

But only one entity can actually make all those wishes, wants and hopes come true. If government becomes involved it has the power to fulfill the wishes and hopes of these three disparate special interest groups.

That’s what happened in 2008 when two Australian toilet paper manufacturers, Kimberly Clark Australia and SCA Hygiene as well as the Construction Forestry, Mining and Energy Union (CFMEU) and the World Wildlife Fund essentially colluded to keep foreign manufactured toilet paper, primarily from Indonesia and China out of the country. Their ostensible complaint was those countries were “dumping” their product in Australia.

For a short time they succeeded in getting imports restricted by the Australian Customs Service, until, it seems, the ACS did a study to determine the validity of the complaint. Their findings were significant. The Australian Customs Service report calculated that the potential downward pressure of imports could be as high as 42 percent of the price.

In other words, the collusion would cost consumers in Australia 42% more because the competitive pressure that kept prices low would have been removed. In addition, a recent report commissioned by the Australian government found that “illegally logged material” – one of the prime reasons these groups claimed Australia should ban imports of foreign wood products – only comprised 0.32 percent of the materials coming into Australia. In other words, the threat was insignificant.

That’s Australia, but what about here? Well, we’re hearing the same sorts of rumblings concerning “green protectionism”.

Sadly these campaigns appear to be part of a spreading green protectionist disease, where industry, unions and green groups work together. In the United States the disease was brought to life by the Lacey Act, which imposes extra regulation on imported wood and wood products to certify their origin and make them less competitive.

The Lacey Act is actually an update of a 1900 law that banned the import of illegally caught wildlife. It now includes wood products (2008). And that means, since extra steps and cost are incurred by foreign manufacturers, that consumers are stuck with the increased cost.

While the reasons for protectionism may sound good on the surface – save the forests, higher wages, less competition to ensure jobs – it isn’t a good thing. If freedom is defined by the variety of choices, what protectionism does is limit those choices and impose an unofficial tax on consumers. They end up paying the cost of collusive action between government and special interests.

So, each time your government announces that it is doing you the favor of limiting the imports of this commodity or that, based on “green” concerns, hold on to your wallet. Whatever the government is protecting you from, you can rest assured that the price of the domestic variety is headed up, since the other product of government intrusion is limiting competition. Rule of thumb: restricting free trade is rarely a good thing. And the only entity that can do so is government. “Green” is just the newest color in an old and costly game – protectionism.

7 Responses to The folly of green protectionism

  • But “green” sounds so much more PC than “buy American (or Australian)”.
    Both are equally bankrupt pretenses for taking freedom of choice from people who wish to trade with each other.
    Distorting markets is both a way of lowering the standard of living in practical terms, and immoral philosophically.

  • 42%! There’s a number you can sink your teeth into.

    When free-traders talk about the case for freer trade often the benefits are intangible. The benefits of products with better quality, lower prices or more choices are hard to accurately quantify to lay people. I think this is one reason why the protectionist reflex remains so strong despite the intellectual horsepower behind free trade.

    I’ll give you anther example of the folly of protectionism.  I use over 250K per year in dairy products at our business, but it is against the law to import milk and cream from the US into Ontario, Canada.  It’s a fact that I could purchase the same product in the US and pay 40-50% less than I do here.  And the USD is more or less at par to the Canadian dollar.

    You read that right. I could put another 125K per year back into my business: purchase better equipment, hire more staff or I could simply take the profits if we trulyhad free trade between Canada and the US.

    You can guess correctly that I really dislike the policies of our politicians wrt to dairy policies.

  • The Australian consumer is getting ripped off more than you think.  If protectionist import policies account for 42% of the price of toilet paper, the increased cost to consumers is actually slightly less than 75%.  Not as bad as US consumers getting ripped off via sugar policy, but pretty bad, nonetheless.

    • Not only do the consumers get ripped, candy makers can’t export much because their input cost is higher than for other countries.

  • McQCan anyone now figure, based on that formula, what the missing part of the equation might be? The part that is necessary to make such collusion pay off?
    Yes, government.

    But… but… but… Government is our FRIEND!  Government protects us from eeeeevil, rapacious corporations that would otherwise refuse to sell us the goods we want at the prices we are willing to pay or hire people to work for them and would rape and pollute the entire planet!!!  Government wouldn’t collude, even unwittingly, with nasty ol’ corporations to the detriment of The People!!!  How can you suggest such a thing???

    / sarc

    But is this not the mantra of the left?  Do they not insist that government IS the magic panacea, the knight in shining armor that is the only thing standing between us and the sinister fatcats who would enslave us with slick marketting campaigns, forcing us to buy things that we don’t want or need?  It never occurs to these morons that corporations can’t force anybody to do anything without government approval, either tacit or explicit.  In days past, when big corporations used thug tactics against their workers, they could do it because the government refused to protect the basic rights (life and liberty) of the workers… when it wasn’t government police or even troops who were doing the oppressing, that is.  Now, who is one of the biggest proponents of Big Government?  None other than labor unions.

    When people struggling for civil rights were being beaten and even murdered, who was it who either stood by and did nothing, or even joined in the violence?  Again, it was government.  Now, who is another of the biggest proponents of Big Government?  None other than “civil rights” organizations.

    The list goes on.

    What we see is nothing surprising to anybody who ponders human nature for a moment.  We all have some desire for power over our fellow men, even if its for no other purpose than to protect ourselves.  So, it’s not power we don’t like: it’s power controlled by other people.  Libs are no different.  They see Big Government as the Big Stick, and they intend to be the one holding it.

  • I really hate to say this…but sometimes environmental tariffs make sence.

    I have worked for years in communist China, building steel mills.  They run on very nasty, high sulphur coal and there are NO environmental controls.  We would get a black, tarry fallout every morning and there were no trees living for miles around. 

    According to the Chinese ambassador to Japan in an interview on NPR circa 2004, China uses ten times as much coal per unit of steel produced as the U.S.  I surmise they can do this because it is essentially free, mined by slave labor from political prisoners.

    I have also built mills in Brazil, and they are almost as nasty.

    I’d love to see about a 300% ‘breathing tax’ on steel from both places, but I know they would just sell to India instead.  We need another way to influence their behavior.  I wish I knew what that would be.

    Oh, FWIW, fourty years ago the U.S. industry was just as bad with rivers catching fire, etc.  The EPA is actually good for something, much as they are getting to be a pain.

    Also, while unionized legacy U.S. mills were going bankrupt a few years ago, the new breed of generally non-union mini-mills was making money faster than they could count it.  I’ve worked in both places, a very interesting dichotomy.