Taxing the Poor

Two decades ago, one might have defended this system as a tough but arguably effective way to protect U.S. industries. But today it is neither keeping jobs at home nor helping working-class Americans. If anything, it is punishing them for buying cheap imported goods at Wal-Mart and Costco. As China's economy booms, the Internet transforms the service sector, businesses develop more elaborate multinational supply chains, and the container-shipping and air-cargo industries slash transport costs, the tariff system's effects on employment are disappearing. In 1998, high-tariff industries -- such as shoes and textiles -- employed about 930,000 people in the United States. By 2002, the number had declined to 650,000. Now, with tariff rates unchanged, the figure has dipped to 400,000 U.S. workers. And the highest tariffs are often the least effective. The 48 percent sneaker tariff, for example, falls on a product that has not been made in the United States since the early 1970s. The United States today now finds itself clinging to an antiquated system that hits poor people hardest and protects few if any jobs while stunting growth and discouraging exports from some of the world's poorest and most vulnerable countries.

The perversity of the tariff system, of course, is not the only trade question the presidential candidates should be debating. Senators McCain and Obama should be asking how the United States can remain competitive as Asia rises? How will the U.S. food-safety and consumer-safety systems, set up for the 1970s, adapt to the multinational supply chain? Which industries and countries should our trade negotiators target as the main export opportunities? How should trade policy relate to foreign policy and strategy? And what is the best way to help workers adjust to competition and communities deal with mass layoffs? These are all reasonable and strategically crucial questions to ask. Unfortunately, the correct responses are far from obvious. By contrast, a closer look at our tariff system would raise a question which is much easier to answer: should we really be taxing cheap shoes and clothes?