One of the wonderful little facets of our trade policy with much of the world are the exorbitant tariffs we levy on textiles – almost half of all tariffs are on them, according to NPR’s Planet Money. If we want our revenue raising for the government not only to be effective at getting funds but also fair in its effects, this is a disaster. The way the tariff code works – by charging massively different rates for the type of imported clothing – leads to major fraud, with many companies claiming to be making waterproof clothing, or using polyester instead of cotton. Of course, to fight this, we need to literally set up laboratories whose sole purpose is tightly inspecting thousands of pieces of clothing to see under which arbitrary set of the tax code if falls under. In this absurd system, hundreds of highly skilled people are hard at work to enforce laws that shrink the economy.
Maybe this would be forgivable if this tariff worked to help improve welfare, or was distributed fairly. But this is the worst type of regressive tax: it hurts Americans who can ill-afford the huge increases (with tariffs over 50% on some items) in the price of their clothing, and it hurts providers abroad who are often in extremely poor countries. One example Peter Bergen mentions is Pakistan: this American ally, whose poverty is a continuing source of strength for radicals, has 55% of its exports in textiles. The fact that the world’s largest importer makes it almost unprofitable to export textiles here hurts people Americans and manufacturers abroad. Just another glimpse at how, if we really wanted to help people, how we do it is crucial: paying American textile manufacturers directly, while a total waste of money, would at least be an improvement on the current system.
Photo: Taken in Sindh, Pakistan by Muhammad Ghouri