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Trade Protectionism Is Fostering Crony Capitalism

by Thomas Aiello / /

When Paul Ryan was on the GOP’s presidential ticket in 2012, he was asked about the role of government in the economy. His response is one that would make all supporters of the free market cheer: “Big government economics breeds crony capitalism. It’s corrupt, anything but neutral, and a barrier to broad participation in prosperity.” While the quote may be aged, the wisdom is not. When individuals and businesses can freely trade without undue government interference, both buyers and sellers benefit. But as we’ve seen, Washington bureaucrats are addicted to getting a slice of every industry to exert their influence.

Perhaps the agency that most embodies the spirit of crony capitalism is the US International Trade Commission (ITC), a government agency that is meant to be the “cop on the beat” and fight unfair trade practices committed against American businesses. Leveling the playing field to ensure American goods are not injured through anticompetitive means is a noble goal in theory, but in practice, the ITC is too often nothing more than big government looking out for big business.

American firms can bring a case to the ITC that they were “injured” by a foreign competitor. But lately, these companies are using this process as a shield against foreign competition in order to defend their market share. Instead of innovating, lowering prices, or building a better product, companies can run and hide behind the might of the federal government. This is not what is supposed to happen.

And this issue isn’t just a one-off -- it's happened multiple times just in the past few months. Just recently, the ITC sided with Boeing that the Canadian aircraft maker, Bombardier “dumped” new passenger jets on the US market in its sale to Delta. Despite the fact that Boeing’s case was paper thin -- they don’t even manufacture an aircraft in the class in question -- the ITC agreed to institute duties of 300 percent on the planes in order to protect Boeing from the alleged injury.

This is similar to the recent increase in petitions filed under the arcane “safeguard” process, which until earlier this year, hadn’t been utilized since 2002. Safeguard actions are used to protect domestic companies not against unfair or illegal activities, but simply from fairly traded international products. Such was the case when washing machine maker Whirlpool filed against South Korea-based Samsung and LG for selling cheaper machines. And when several US solar companies claimed that cheaper solar imports, mainly from China, were hurting domestic manufacturing. Ironically, The Solar Energy Industries Association estimates that higher tariffs and minimum prices on imported solar panels would jack up domestic prices of these products and lead to a loss of 88,000 American jobs in the U.S. solar industry.

Policies that restrict competition are the antithesis of free-market capitalism. And the result will have disastrous impacts on consumers and taxpayers who will bear the burden of less choice, higher prices, and lower-quality goods. Consumers have benefitted immensely from expanded trade, and turning back on the progress will only leave our entire country worse off. Reforms must be made to the ITC sooner rather than later.