The Cost of Quotas

When Congress debates foreign-trade policy, protectionist lobbyists are always on hand to reel off doleful statistics of plants closed and jobs lost because of competition from imports. At last free traders are acquiring some figures to throw back. In a study to be published shortly by the American Importers Association, Economist C. Fred Bergsten, a former aide to Henry Kissinger, adds up the bill that the U.S. consumer is paying for protectionism. His estimate: tariffs, quotas and other devices raise American living costs by $10 billion to $15 billion a year.

The most direct cost comes from tariffs, but it is relatively minor--about $2 billion a year added to the price of imported merchandise. Much more inflationary, Bergsten finds, are the quotas that the U.S. imposes on a lengthening list of products: oil, steel, meat, sugar, textiles. Such quotas now apply to products that make up 15% to 20% of the consumer price index. They hurt consumers by forcing them to buy more expensive U.S. goods and encouraging American manufacturers to raise prices more than they would dare if they were faced with unrestricted foreign competition.

Oil quotas alone, according to the estimate of a presidential task force, cost consumers more than $5 billion a year. Sugar quotas, Bergsten figures, add another $500 million to $750 million to consumer bills by keeping U.S. prices twice as high as the world price. Dairy-product quotas, he calculates, raise living costs about $500 million a year, while restraints on meat imports increase shoppers' expenses by $350 million annually. The meat quotas "hit low-income families with particular severity because most meat imports are used in the manufacture of lower-cost items such as frankfurters and hamburgers."

Labor Push. Even these costs pale in comparison with what consumers would face if Congress were to pass the Hartke-Burke bill. On nearly all imports that measure would provide for quotas aimed at rolling back the inflow of foreign goods to 1965-69 levels. Bergsten warns that the resulting price rises might well be great enough to defeat the Administration's Phase II policy, and might necessitate stricter controls.

The Hartke-Burke bill is being co-sponsored by four Senators and 66 Representatives and pushed by the AFL-CIO in a break with unionism's free-trade tradition. In Bergsten's view, that reversal has come about because workers in steel, textiles, shoes and glass, whose industries have been hurt by imports, are heavily overrepresented in the AFL-CIO, while workers in big exporting industries like chemicals and machinery are underrepresented. Fortunately, the dangerous Hartke-Burke bill is likely to be bottled up in committee this year. Its existence, however, and the protectionist strength indicated by its list of sponsors, is having a negative effect on trade policy. The Nixon Administration is afraid to submit to Congress a much-needed bill giving the President authority to negotiate new tariff concessions because it might backfire by attracting protectionist amendments similar to the quota provisions of the Hartke-Burke bill.

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