Just as sure as shooting, every time politicians get involved in regulating for the purpose of enriching a special interest group, they will do their best to justify it by way of a public interest argument. The U.S.-China trade negotiations are shaping up to be “Bootleggers and Baptists” one more time.
Remember the story? Both bootleggers and old-school Southern Baptists traditionally like state laws that shut down liquor stores on Sunday — for entirely different reasons. Baptists are known for a historic predisposition against Sunday drinking. Bootleggers corner the market on the day of rest.
And the politicians that deliver the laws? They earn the praise of the Baptists and perhaps some nice campaign contributions from the bootleggers. No politician would ever say that a Sunday closing law was designed to enrich bootleggers. They don’t have to!
The story illustrates something very common: how politically powerful interest groups can use regulation for their own benefit at the expense of their customers (who wind up drinking bathtub gin) and competition (liquor stores which lose one-seventh of their business).
Strict fuel economy standards with loopholes for light trucks bring together regulators, influential American truck manufacturers, and drivers who can afford to buy expensive new trucks. Water pollution standards that are stricter for new plants than for existing plants bring together regulators and established plant operators. Government-mandated health insurance requirements bring together those who seek to regulate the market and government-favored (or government-run) insurance providers.
These policies may align with what a lot of well-meaning people want, but they have winners and losers. Yet it’s more than that — it’s about carefully designed rules that can raise costs for a special interest’s competitors, favor organized labor over other workers, block the import of low-cost foreign-made goods, or cartelize markets.
In every case, the political class has to justify their actions and explain what they are doing, and that’s where “Baptist” justification enters the story. They never say they are trying to line the pockets of people who get them elected. Instead, with eyes lifted toward heaven and in solemn tones, they explain that they are serving the public interest. With fuel economy, they are doing their part to reduce carbon emissions. Water pollution control? Protecting the planet from further degradation. Healthcare? They want everyone to have access.
Of course, all of this may be true, or partly so, but there are always “bootleggers” lurking in the background.
That brings us to the much-celebrated Trump trade wars. The bootlegger part of the story should be obvious: Organized labor and the owners of less-than-competitive manufacturing plants love tariffs that keep foreign competition at bay.
But what’s the Baptist-style public interest story? When Trump administration officials promised tariffs on foreign automobiles and parts, they argued that in the event of a major war, we Americans would not be able to rely on German, Korean, and Japanese SUVs to give us mobility. We would need SUVs made on U.S. soil. Tariffs that reduce foreign market share make it possible for Americans to sleep better at night, knowing that we can produce enough wheels to get us to war. Maybe this was a stretch, but it was a public interest explanation.
As for the question of whether or not to roll back Chinese tariffs, what’s the Baptist explanation? This one requires even more creativity, and recent negotiation news stories tell us that the political class is definitely creative. Will the trade negotiators erase all recently imposed tariffs and restore American consumers’ full purchasing power? Or will President Trump’s negotiators go only part way and hang consumers out to dry?
According to a recent Wall Street Journal story, negotiators are leaning toward the partial consumer restoration. Some tariffs may be kept in place in order to “compensate the U.S. for what the White House calculated was the harm to U.S. companies caused by China’s forced technology transfers.”
So, to interpret that statement, negotiators want to continue to penalize American consumers by keeping tariffs in place on Chinese goods. This will somehow offset the costs accepted by U.S. firms that voluntarily agreed to transfer technology to Chinese interests as a condition for building factories in China. Presumably, the American firms would not have gone to China for the purpose of losing money. They gained, or miscalculated.
From where I sit, the political class has completely missed the target with this latest moral justification. The tariffs are most definitely helpful to some specific industries which also happen to overlap with some key political constituencies. But there is no public interest argument for imposing higher prices on American consumers as a misguided way of punishing China.
It’s time, I think, to give the bootleggers and Baptists a day off.
Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business and Behavioral Science. He developed the “Bootleggers and Baptists” political model.
