Tuesday, August 10, 2010

Protectionism Endangers American Industries, California Wineries

By Douglas V. Gibbs

Progressives do not support free trade unless it is done in a true globalistic fashion where a centralized international government system regulates it. Therefore, until such a governmental system arises, the liberal left will stand against free trade. The guard against free trade has been put into place at the federal level with the Democrat Party disapproval of NAFTA, and at the local level, such as with a recent move against international sales of wines from Temecula's Wine Country.

Temecula's wineries bring in many tourists every year, and produces some of the finest wines from California. Temecula wines are enjoyed around the world, and the region is quite renowned for its fabulous wineries.

Enter, stage left, protectionism.

The mantra to "buy American," is older than all of us. To buy American products is good for our economy. It is also good for our economy when the rest of the world is buying our products as well. But buying American, in a free market that thrives on competition, must be an option - in other words, something we voluntarily do because, well, because those products are the superior products.

The liberal economic system of today, which includes protectionism, is our generation's mercantilism. The system of British mercantilism is part of the reason we fought against the British Empire for our independence. The system is built on protectionism, government franchise monopolies, a state-run bank, and interventionism that benefits the government and its supporters at the expense of the general public and the private industries.

During the early 1800s, Henry Clay, the leader of the Whig Party and a student of Alexander Hamilton's theories of economics, picked up the mantle of American mercantilism, and re-introduced it to American Politics when he took a U.S. Senate seat in 1807. Under Clay's guidance, the American economic agenda included protectionist tariffs, corporate welfare, and nationalized banking. Throughout his long political career he championed protectionism and corporate welfare. Clay's policies would have crippled the American economy by depriving it of the advantages of the international division of labor. Clay, and the Whigs, constantly proposed protectionist tariffs they claimed would benefit manufacturers, but the tariffs turned out to be all cost and no benefit. Manufactured goods went up in price, and the American protectionist tariffs cut off a large enough amount of foreign trade because they made America's trading partners poorer. Tariff increases in 1824 and 1828, also proposed by Clay, pushed some states to the point of declaring nullification against the federal government, which means they refused to recognize the tariffs, because the effects were actually devastating, rather than beneficial, as the Whigs proclaimed.

The result was that the protectionist system favored the strong in order to win and keep their adherence to the government. The system offered shelters and devious schemes in order to protect American enterprises, but in the process corruption began to run rampant because of the close association of government with the private industry. In the end, the protectionist policies led to rising public debt, higher taxes, and lower manufacturing.

After the States threatened nullification, Clay and the Whigs compromised, enacting lower tariffs. About the same time, President Andrew Jackson defunded and closed the centralized Bank of the United States, and America's politicians gave up on a system similar to British mercantilism for the moment.

Such economic schemes, in the end, are systems of statism, under which the majority party uses its political power to plunder the minority. Mercantilism in America caused economic conflict, and financial uncertainty.

As a result of NAFTA being poorly written, and using lop-sided rules that actually gives American businesses the disadvantage, today's Democrats have determined that free trade is bad, and that it must be stopped - beginning with NAFTA. In fact, in 2009, President Obama moved to impose a 35% tariff on low cost tires imported from China.

The New York Times declared the decision to be a major victory for the United Steelworkers, the union that represents American tire workers. In reality, the move was an attempt at protectionism, while simultaneously cementing the unions' backing for his health care reform agenda.

From the Whigs, to Hoover's Smoot-Hawley Tariff Act of 1930, however, we have learned that such acts of protectionism always has disastrous results.

The Chinese were not shy about expressing their displeasure with Obama's tariff move, nor was European nations later, when Obama's protectionism threatened to affect trade with Europe as well.

Now there is federal legislation that will open the door for protectionist-minded officials in other states to pass laws blocking Temecula winderies from shipping wine to customers outside California.

What is worse, is one of the bill's primary sponsors, and self-proclaimed "progressive Republican," is Mary Bono Mack, our local representative in the U.S. House of Representatives.

Local winegrowers claim the measure could wipe out the roughly 15 to 20 percent of sales in the area that are generated by out-of-state shipments.

Earlier today the California State Assembly voted unanimously to oppose the measure, which is numbered HR 5034. And the California Senate voted 26-0 on June 17 to go on record opposing it.

The Temecula vintner association, and its attorney, sent separate letters to Bono Mack urging her to pull her sponsorship.

The politicians claim the bill enables States to better regulate alcoholic beverages within their borders. . .

Have you ever seen a time when additional regulation against the private sector has helped private businesses?

The argument is that by bolstering regulatory powers, the legislation would make it difficult, if not impossible, to successfully challenge a law that discriminated against out-of-state wine producers.

The attorney for Temecula's wineries stated, "If you don't have the volume to be more than a blip on the wholesalers' radar, then your wine will be stuck in the local area."

Wilson, the Temecula association president, said that when a tourist escaping, say, the frigid winter weather in Wisconsin stops by a Temecula winery and likes its wine, the person often asks where he or she can buy that vintage back home.

And the answer is always, "You can't," Wilson said.

Wilson said the only way to get the wine to that Wisconsin customer ---- or any other out-of-state customer ---- is for the winery itself to arrange to ship bottles directly to that person.

According to a study, local producers pump $600 million into the Riverside County economy annually. Temecula's 30 wineries collectively sell more than 250,000 cases a year, with a case being a dozen bottles, Wilson said. And 15 to 20 percent of those cases are shipped across state lines.

HR 5034, by eliminating the allowance to ship out of state, would then eliminate up to 20 percent of the local winery's sales.

-- Political Pistachio Conservative News and Commentary

Federal legislation stirs concern in Wine Country - North County Times

Obama's New Protectionism - The American Thinker

British Mercantilism, Hamilton's Curse by Thomas J. Dilorenzo

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