Is the Misc Tariff Bill Special Interest Sausage Sandwich?

November 19, 2014


The legislative sausage known as the Miscellaneous Tariff Bill (MTB) is being pushed for renewal in the lame duck session. However, there is reason to be both critical and supportive. 

What is this bill? The website customsinfo.com has this information.

The Miscellaneous Tariff Bill (MTB) is an annual piece of legislation that is passed by the US Congress to temporarily reduce or suspend tariffs on certain imported products and make technical corrections to US tariff laws.  Since 1982, Congress has passed these bills, known as miscellaneous tariff bills (MTBs), to boost the competitiveness of U.S. manufacturers by lowering the cost of imported inputs without harming domestic firms that produce competing products. In addition, in the case of finished goods, MTBs similarly reduce costs for consumers where there is no domestic production and thus no impact on domestic firms.

There is a lot of industry lobbying for this bill, even more than for the job-killing trade agreements in many instances.  For example, the top trade lobbyist at NAM wrote this op-ed in The Hill urging MTB passage and making an argument that it is in the national interest.

We at CPA have stayed out of the MTB debate because it is largely, but not wholly, irrelevant to the big picture issue of fixing America's economy and trade policy.  As in many cases, the national interest and special interests are not always in alignment. The question becomes "which will govern... the national or the special interest?"

The special interest side:  The International Trade Commission receives industry requests for low tariff treatment based upon the fact that the US does not make this or that particular widget.  If we don't make the widget, the ITC will tell Congress as much in a report. The widget will likely be in the MTB to be passed.  If you are a company who needs that widget, you really want the MTB passed to lower your cost of acquisition through a zero tariff.

I can't argue with that company, and if I did, I'd probably have a fight on my hands. Not all "special interests" are bad, many are ok and many are good.

The national interest side: There is little national interest in the MTB in terms of assisting a positive competitiveness strategy for the US.  Cheap imported goods, taken too far, is the opposite of a competitiveness strategy.  Taken too far, you get persistent economy-destroying trade deficits rather than balance.

Like most of trade policy, the MTB is a concoction of special interests. It is legislative sausage. The sum of which many presume is in the national interest.  But what is the strategy?  Shouldn't we look to try to make some of those things here?  How many of the widgets are not made here due to foreign trade cheating and mercantilism? Tariffs can be market correcting... a way to neutralize the Big Government action by foreign countries that interfere with our domestic market and global markets.

Market correcting tariffs can thus incentivize domestic production, which will allow us - even at the precompetitive stage - to achieve economies of scale, productivity, market share and jobs to develop further in the future.

This is what a national competitiveness strategy would do.  It would - or should - consider the health of domestic supply chains that we have or that we want to have.

Let me say that again.  The focus should be upon optimizing the domestic supply chains.  We probably should not initially focus upon the firm or the product. Firms and products are not irrelevant at all, but the idea is that the "supply chain" is the driving force.  The core thing that metrics should assess as to health or sickness.  Then the firms and products within the supply chain will be generally ok, or not, accordingly.

The supply chain is what produces the direct and indirect jobs, the value add, the wealth, the innovation, etc.  As you lose parts of the supply chain, the whole ecosystem of that supply chain erodes.  The more pieces you lose, the more erosion you have.

So the MTB is not part of a national strategy because we don't have a strategy. There is reason to believe that some parts of the MTB would undercut an intelligent national strategy.  But that is a theoretical argument right now.

It is certainly real that we don't make some of those MTB listed products, and that companies here need them.

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