I was there barely a week after President Trump\u2019s imposition of 20% tariffs on logs imported from Canada. It was also just days before elections that would determine which party controlled the British Columbia Legislature and, thereby, who would serve as the province\u2019s next Premier.<\/span><\/p>\n The timing was superb for enjoying the sites of Vancouver but not so good for Trump\u2019s tariffs.<\/span><\/p>\n A Tax on Americans<\/strong><\/p>\n As Mark Perry <\/span>explained<\/span><\/a>, the new duties were ushered in amid plenty of bluster about \u201cunfair\u201d and cheap, subsidized lumber from our northern neighbors but they are actually taxes levied on Americans who buy Canadian lumber, especially American home builders, bed-frame and pallet manufacturers, and picket-fence makers. All the time-honored logic of trade economics applies here, suggesting that not much good, and perhaps a lot of harm, would likely ensue for parties on both sides of the border.<\/span><\/p>\n I picked up a copy of the British Columbia edition of <\/span>The Globe and Mail<\/span><\/em> to see what the Canadians were saying about it all. <\/span><\/p>\n As you might imagine, nobody was cheering for Trump and the U.S. In fact, the incumbent Liberal Party of Premier Christy Clark, locked in a battle for votes with the decidedly more socialist NDP (New Democratic Party) and the equally socialist Green Party, felt compelled to prove that its generally trade-friendly posture only went so far. Clark suggested retaliation in the form of restrictions or an outright ban on thermal coal from the U.S. The other parties promised an even \u201ctougher\u201d stance. <\/span><\/p>\n Stooges<\/strong><\/p>\n Protectionism is like a Three Stooges episode<\/a><\/span>: You slap me, I poke you in the eye. The one difference is that when a government slaps and pokes another government, each one ends up assaulting its own citizens as consumers and producers. <\/span><\/p>\n Trump\u2019s ill-timed tariffs were pushing all the major British Columbia political parties in the wrong direction. Voters ended up giving the Liberal Party a razor-thin plurality which may yet dissolve into a loss if the NDP and the Greens team up in a coalition. If that happens, both socialism and protectionism will get a boost in British Columbia while American lumber buyers get slammed.<\/span><\/p>\n But lest we dump all the blame on Trump, let\u2019s understand that this is really a \u201cpox on both your houses\u201d conundrum. In the same newspaper in which I read about Premier Clark\u2019s threatened tit-for-tat, Canadian columnist Barrie McKenna <\/span>pointed his finger<\/span><\/a> at Canada\u2019s existing policies for prompting the Trump tariffs.<\/span><\/p>\n Export Restrictions<\/strong><\/p>\n One such policy is the practice of federal and provincial governments in Canada charging below-market rates when they sell lumber from their vast land holdings. That\u2019s a subsidy, and if the land were owned privately it\u2019s hard to imagine that private firms would charge less than the market will bear and encourage over-use of their resources through underpricing simply to be charitable.<\/p>\n Likely more counter-productive than those subsidies, writes McKenna, are \u201clog export restrictions that exist only in British Columbia.\u201d (Though both British Columbia and the federal government in Ottawa restrict the export of logs from government land, British Columbia is the only government that restricts exports from private lands as well).<\/span><\/p>\n I had to read that two or three times. Log export restrictions? What? So governments subsidize logging on their lands and then stifle the sale of logs to the U.S.? Yes. This is government, mind you, so it doesn\u2019t have to make sense to anybody but politicians and their politically-connected friends.<\/span><\/p>\n McKenna writes, <\/span><\/p>\n Those restrictions, in place since the 1880s, are an aberration in Canada\u2019s generally open economy. Indeed, logging is a rare example where governments dictate to private interests what they can export, for reasons other than national security \u2026 Economists in Canada have warned for years that the policy lessens competition for logs, increases the supply of timber available to mills in British Columbia and suppresses prices by up to 50 percent. And that lowers the cost of <\/span>finished<\/span><\/em> lumber (emphasis mine), such as two-by-fours, destined for the U.S. market.<\/span><\/blockquote>\n If that\u2019s confusing, just think of it this way: What government gives loggers with one hand in British Columbia, it substantially takes with the other by telling them where they can sell their logs. Subsidized logs that can\u2019t go to the U.S. because of export controls end up at Canadian mills at depressed prices. There, they are converted into planks and two-by-fours whose export is not restricted. And it\u2019s those planks and two-by-fours that Trump just slapped a 20% tariff on. <\/span><\/p>\n A Better Path<\/strong><\/p>\n You slap me, I poke you in the eye. Wouldn\u2019t it be better for everybody if we all just stopped slapping and poking each other? Yes, and that\u2019s called free trade. The problem is that even though \u201cfree trade\u201d makes all the sense in the world, governments have both the power and the incentive, at least in the short term, to slap, poke, subsidize, and sell favors. <\/span><\/p>\n Moreover, log export restrictions are not unique to British Columbia. \u201cThe United States, for example, has an export-licensing regime for trees cut on federal and state lands,\u201d says McKenna. \u201cWhat\u2019s unusual about Canada\u2019s regime is that it also covers trees on private land in British Columbia.\u201d<\/span><\/p>\n One of the reasons governments shouldn\u2019t intervene in trade in the first place is that interventions become addictions. The benefits are targeted on a few at the expense of the many and when those benefits are offset by a government on the other side of the border, it\u2019s hard to get the first government to call it quits. Intervention A leads to Intervention B, which provokes Intervention C, which in turn sparks Intervention D and so on, until the process is reversed or the alphabet and economic freedoms are exhausted.<\/span><\/p>\n From another city in Canada \u2013 Montr\u00e9al, in the eastern province of Quebec \u2013 comes an intriguing proposal to scale back some of this nonsense. The Montreal Economic Institute <\/span>suggests<\/span><\/a> that trade negotiators for Canada and the U.S. should work out a \u201clumber for cheese\u201d swap: the U.S. would dismantle its barriers on Canadian lumber and in exchange, Canada would get rid of its barriers on American dairy and poultry. <\/span><\/p>\n MEI says the crazy-quilt patchwork of subsidies, quotas, and export controls on both sides of the border cost consumers billions in higher prices. Since \u201csupply management\u201d by the two governments has been problematic from its inception, premised as it is on the insane notion that fines and penalties help the economy, let\u2019s just negotiate them away. Tit-for-tat in the right direction, for a change.<\/span><\/p>\n Free traders like myself see many advantages to abolishing protectionist devices unilaterally, regardless of what the other side does. As Frederic Bastiat explained, we should be grateful when the sun shines its light for free, even if it means candlemakers sell fewer candles. Forcing everybody to paint their windows black to keep out the free sunlight only deprives everybody of value and convenience. We can apply the savings to some other endeavor, stimulating yet other industries in the bargain. If that\u2019s unrealistic, it\u2019s only because of politics, not because of economics. <\/span><\/p>\n Let\u2019s rid ourselves of these senseless interventions as soon as we can, one way or the other.<\/span><\/p>\n Thinking about all this as I departed beautiful Vancouver, I found myself shaking my head as I\u2019ve done so many times when contemplating the policies of government. What a ridiculous, self-defeating racket this protectionist stuff is!<\/span><\/p>\n Oddly enough, it was the 20<\/span>th-<\/span>century comedian Jimmy (\u201cThe Schnoz\u201d) Durante who gave us a succinct answer to this recurring problem when he said, \u201c<\/span>Don’t put no constrictions on da people. Leave ’em da hell alone.\u201d<\/span><\/p>\n Additional recommended reading:<\/strong><\/p>\n Lawrence W. Reed Lawrence W. Reed is President of the Foundation for Economic Education and the author of the book Real Heroes: Inspiring True Stories of Courage, Character and Conviction<\/a><\/em>.<\/em> Follow<\/a> on Twitter and Like<\/a> on Facebook.<\/p>\n\n
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