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Tuesday, September 13, 2005

Lifting Lumber/concrete tariffs to spur development

President Bush has proposed to lift the tariff on concrete and lumber. Currently there is a tariff on lumber imported by Canada of approximately 50%. This tariff is in response to American lumber companies citing, "dumping" by Canada. dumping is the process in which a company deliberatly "dumps" goods at an unreasonably low price to push national corperations out of business. This is federaly regulated to allow America the ability, in time of war or hardship, to produce these goods. The tariffs raise prices of lumber.

America has a tariff on concrete imported from Mexico, aswell. The tariff of concrete is not as steep as lumber, however, it is still about 26%. This increases the price of domestic goods. this tariff is in response to concrete componies urging congress to help them remain competetive with the market.

Bush wants these tariffs to be lifted. He has the ability in times of neccessity to lift these tariffs. The lift of the tariffs would decrease the current prices of both lumber and concrete. The elimination of the tariffs would also continue to drive the U.S. economy. Many builders and contractors have taken a huge hit to the revenue they generally enjoy. This puts a huge damper on the economy. Home production is a large indicator of how the economy is performing. The lift of the tariff would allow the economy the ability to perform at the level it once did.

A tariff that is in response to dumping has been proven to do nothing but raise prices. The economic theory of dumping only relates to neccessary public goods, i.e. Security, energy. The economy in a free-market out performs a market that imposes tariffs. Lumber and concrete are markets that need no tariffs. The release of the tariffs will allow a much faster recovery for the hurricane survivors. the economies of Louisiana and Alabama have stopped. Louisiana is a huge producer of concrete. The introduction of outside products will allow those businesses to rebuild much faster and rejoin the market. If the tariffs are lifted the economy will continue to grow, even after such devistating events like hurricane Katrina.

So, my concern is that congress will not support Bush in his decision. In order for our economy to continue its steady growth, we must eliminate any tariffs that include building materials and lumber. Now we will see if the right decision will not be over-shadowed by the media or politics. Should we let the economy run free for a while?

Comments:
I like your post and think you make a very valid point. Let the goods and services flow freely between nations and consumers will benefit.

I have a question though. You write "The economic theory of dumping only relates to neccessary public goods, i.e. Security, energy." I understand national security as a public good, but not energy. How is energy a public good?
 
Energy is a neccessary public good because it must be controlled by the government. If energy was a completely free market there could be irratic price gouging. The government must control energy because it allows society the ability to have energy at a reasonable and stable cost. If other countries controlled our energy production, imagine the control they would have on the entire economy. The other country would have the "power" to turn off our energy whenever it wanted. All markets would be unable to run freely due to the constraint of this one good.
 
I suggest that "energy" is a good that is rival and excludable. I consume my own gallons or gasoline and my own kilowatt hours of electricity. And, I can be excluded from both kilowatt hours and gallons. Looks like a private good to me.

I also suppose that "energy" has something to do with national security. Maybe. If so, then perhaps there is something about energy markets that contributes to a public good, or to the generation of an externality. But, the good itself is private.
 
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