Tariffs & Taxes & Invisible Lines

Economics: Lesson 155

Do import quotas benefit most voters economically?

People understand that when they purchase an imported good from across the sea and it is brought over their national border, that they will have to pay an import quota. They don’t know why, but they pay it anyway and are told it is to protect them from foreign companies taking advantage of them.

There are a few other names for import quotas; tariffs and taxes. What?! Did you say tax? That is right, import quotas are simply another form of taxation, but the government does not call it that because people will not vote for a politician putting in place more taxes.

Special interest groups invoke tariffs and import quotas because they benefit them and protect them from outside competition, and the government wants more taxation because that means more money in their pockets.

Import quotas are an arbitrary tax, and arbitrary taxation undermines the rule of law. The voters do not gain anything from it, but the opposite. They now have to pay another tax every time they want to buy something outside the national border. You would think the public would be outraged by this. Yet, when you tell the public that you are protecting them from foreign competition, they all cheer. Because the propaganda tells them that they are being protected from outsiders.

From the point of view of economic analysis, this is not a legit case. What is the difference between a street to a town line, county border, and national border? Nothing. Borders have legal functions, which is a matter of sovereignty. It establishes who has the right to participate in the political process and which system of law a person will suffer. Borders do not economic function.

If a person wants to watch a movie that was made in England, all he has to do is buy a movie ticket and he can watch it. There is no tax, tariff, or quota included in that price. Why? Because the information sector escapes taxation. The internet changed the way information is bought. There are no borders on the internet. If a person from India wrote a scientific paper or manual to some machine and you need it, all you have to do is buy it and download it. But, if you wanted to buy a book that contained that same paper or manual from India, you would have to pay a tariff because it is being imported from India.

The internet does not recognize borders; the judicial jurisdictions, and this is completely undermining the national control of tariffs everywhere. The government does not want the public to figure out that there is no difference between your local town line and the invisible line between the U.S. and Mexico. If there are no taxes and tariffs on information from the internet, there should not be an import quota on physical goods.