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free trade

[reposted from Cato at Liberty]

Economic sanctions, when they have an effect at all, tend to inflict misery on a targeted region’s civilian populace and often drive it further into dependence on violent overlords. That truism will surprise few libertarians, but apparently it still comes as news to many in Washington, to judge from the reaction to this morning’s front-page Washington Post account of the humanitarian fiasco brought about by the 2010 Dodd-Frank law’s “conflict minerals” provisions. According to reporter Sudarsan Raghavan, these provisions “set off a chain of events that has propelled millions of [African] miners and their families deeper into poverty.” As they have lost access to their regular incomes, some of these miners have even enlisted with the warlord militias that were the law’s targets.

Congress added the provisions to Dodd-Frank in a fit of moral self-congratulation over making sure Americans had the chance to be ethical and thoughtful consumers of such products as jewelry and cellphones (as well as thousands of other products, as it turned out, from auto parts to the foil in food packaging). Publicly held companies would be required to report on their supply connections to “conflict minerals” such as tin, tungsten, and gold mined in war-torn areas of the Democratic Republic of the Congo. Lawmakers assigned enforcement of the law to the Securities and Exchange Commission – a body with scant discernible expertise in either African geopolitics or metallurgy – and barbed it with stringent penalties for disclosure violations, to which are added possible liability in class-action shareholder lawsuits.

Reactions to this morning’s Post account frequently employ words like “unintended” or “tragic” to describe the effect on miners of the law, which people in the Congo soon came to call “Loi Obama” – “Obama’s law”.  Unintended and tragic? Maybe. But not unforeseen, because the signs that the law would backfire this way have been in plain sight for years now – as in this 2011 account by Prof. Laura Seay (via) of how “electronics companies now have a strong incentive to source minerals elsewhere, leaving Congolese miners unemployed.” Or this 2011 account by David Aronson in the New York Times of the “unintended and devastating consequences” that he “saw firsthand on a trip to eastern Congo.” Or this more recent paper by law professor Marcia Narine.

But although the evidence has been there for years, the will to believe in the law was too strong – a will fueled by anti-corporate campaigners who take it on faith that when brutalities in the underdeveloped world occur within two or three degrees of separation of the activities of multinational businesses, the right answer must be to blame and shame the businesses.

You might call it an expensive lesson for Americans too, if you assume that anything has been learned. A recent Tulane calculation found that the costs in business compliance have already topped $700 million, with billions more ahead should nothing change. Just this September, the U.S. government conceded that it “does not have the ability to distinguish” which refiners and smelters around the globe are tainted by a connection to militia groups. That is to say, the government has demanded of business a degree of certainty that it cannot achieve itself.  Courtesy of UCLA corporate law professor Stephen Bainbridge, here’s a flowchart of what complying might involve for a given business.

If the new Republican Congress wants to be taken seriously about fixing counterproductive regulation, it should make the repeal of this law an early priority. (& Bader)

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Because if there was any rationale for creating the Department of Homeland Security, it was to ensure that America was not threatened by unlicensed panties suggestive of baseball-team logos. [Tim Cushing, Techdirt]

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October 10 roundup

by Walter Olson on October 10, 2014

September 26 roundup

by Walter Olson on September 26, 2014

  • Was California workers’ comp claim against NFL by former Tampa Bay Buccaneer-turned-P.I.-lawyer inconsistent with his mixed martial arts prowess? [Tampa Bay Times, Lakeland Ledger, earlier and more on California workers' comp and professional football]
  • Salt Lake City’s $6,500 stings: “Secret Shopper Hired to Punish Lyft & Uber Actually Prefers Them” [Connor Boyack, Libertas Institute]
  • Are libertarians undermining public accommodations law? (If only.) [Stanford Law Review, Samuel Bagenstos and Richard Epstein via Paul Horwitz]
  • Why NYC is losing its last bed and breakfasts [Crain's New York via @vpostrel]
  • U.S. continues foolish policy of restricting crude oil and gas exports, time for that to change [David Henderson first and second posts]
  • So it seems the New York Times is now committed to the theory that Toyotas show mechanical unintended acceleration;
  • OK, the future Kansas politician was at the strip club strictly on attorney business when the police arrived. Was he billing? [Politico]

It’s happening just as warned. Janet Fletcher at the Los Angeles Times:

…cheese counters could soon be a lot less aromatic, with several popular cheeses falling victim to a more zealous U.S. Food and Drug Administration. Roquefort — France’s top-selling blue — is in the agency’s cross hairs along with raw-milk versions of Morbier, St. Nectaire and Tomme de Savoie. …

Of course, French creameries haven’t changed their recipes for any of these classic cheeses. But their wheels are flunking now because the FDA has drastically cut allowances for a typically harmless bacterium by a factor of 10.

The new rules have resulted in holds even on super-safe Parmigiano Reggiano, and the risk of losing a costly shipment of a perishable commodity is likely to be enough to drive many European producers out of the market for export to America entirely. Highly praised artisanal cheese makers in the United States are facing shutdown as well. [Michael Gebert, Chicago Reader] Earlier on the FDA and cheese regulation here and, from Cato, here (2010 predictions, before FSMA passed), here, here, etc.

They told us this administration was going to be run by wine and cheese faculty liberals. Now where are they when they could actually do us some good?

Related, note that the regulatory pressure is coming from both sides of the Atlantic: “Newsweek: French cheesemakers crippled by EU health measures” [Cheese Notes, with discussion of role of giant manufacturers whose processed cheese operations can comply with the rules] (& welcome The Week, Reason readers; cross-posted at Cato at Liberty)

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CanadaQueenStampRemember when Canada was regarded as the high-tax, big-government country, and we weren’t? How times have changed. Burger King is considering becoming Canadian through a tax inversion deal with donut chain Tim Horton’s, aware that north of the border “corporate tax rates are as much as 15 percentage points lower than in the United States,” in the words of Daniel Ikenson at Cato, who writes: “If the acquisition comes to fruition and ultimately involves a corporate ‘inversion,’ consider it not a problem, but a symptom of a problem. The real problem is that U.S. policymakers inadequately grasp BurgerStamp that we live in a globalized economy, where capital is mobile and products and services can be produced and delivered almost anywhere in the world, and where value is created by efficiently combining inputs and processes from multiple countries. Globalization means that public policies are on trial and that policymakers have to get off their duffs and compete with most every other country in the world to attract investment, which flows to the jurisdictions where it is most productive and, crucially, most welcome to be put to productive use.” And the fact is that the United States, once the domicile of choice for international business, has slipped badly down the ratings of how difficult it is to do business in various countries. Policymakers “should repair the incentives that drive capital away from the United States.” Full post here. More: Stephen Bainbridge.

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As the war on musical instruments continues [The Jazz Line; earlier here, etc.]

The feds’ insane war on antiques and musical instruments continues. “Orchestra spokesman Adèl Tossenberger said in an e-mail that the seized bows did not contain any ivory and the orchestra received a certificate from a Hungarian expert verifying this.” It is unclear why they had to pay a $525 fine anyway. A few days earlier, according to a German publication, “the Munich Philharmonic nearly cancelled three performances at Carnegie Hall in April after that orchestra’s string players could not produce CITES certificates for their bows.” [WQXR, The Violin Channel] Earlier on the old-ivory ban here, here, and here; on musical instruments here, here, and here.

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“As part of trade talks, the European Union wants to ban the use of European names like Parmesan, feta and Gorgonzola on cheese made in the United States.” Having achieved some success in negotiations with Canada and Central American nations, Europe may seek to restrict marketing of U.S.-made cheeses such as Asiago, fontina, Muenster, and Neufchatel.

And it may not be just cheese. Other products could include bologna, Black Forest ham, Greek yogurt, Valencia oranges and prosciutto, among other foods.

No word on renaming French fries. [AP]

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Because of the 1920 law, backed by labor unions and U.S.-flag maritime interests, it’s infeasible to ship propane directly from Texas to the Northeast, so instead Texas ships sail to Europe and other ships sail back with propane for Northeastern customers. [Bloomberg News; earlier on road salt]

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Jones Act strikes again

by Walter Olson on February 18, 2014

Now the 1920 protectionist maritime legislation is “holding up crucial salt supply for New Jersey highways.” Getting a 40,000-ton shipment of rock salt from a port in Maine “to Port Newark has been frustratingly slow because of the state’s inability so far to obtain a federal waiver of the 1920 Maritime Act, which requires that the shipment arrive on a vessel flying a U.S. flag.” [NorthJersey.com] Update: looks they’ll get salt. More: Dan Lewis, Now I Know (“cabotage”).

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What do our border control authorities have against musical instruments? First it was pianist Kristian Zimerman’s Steinway, destroyed by TSA agents because they thought the glue in it smelled suspicious. Then it was the prized cello bow that Alban Gerhardt says was snapped in two by TSA agents (bows are surprisingly costly things, and can run the price of a Mercedes). Now, according to a report in the Boston Globe, customs agents mistook a rare collection of handmade flutes for pieces of bamboo and destroyed them as illicit agricultural goods. I’ve got a discussion at Cato at Liberty.

Cato trade analyst Dan Ikenson draws my attention to this passage of Frederic Bastiat’s:

Between Paris and Brussels obstacles of many kinds exist. First of all, there is distance, which entails loss of time, and we must either submit to this ourselves, or pay another to submit to it. Then come rivers, marshes, accidents, bad roads, which are so many difficulties to be surmounted. We succeed in building bridges, in forming roads, and making them smoother by pavements, iron rails, etc. But all this is costly, and the commodity must be made to bear the cost. Then there are robbers who infest the roads, and a body of police must be kept up, etc.

Now, among these obstacles there is one which we have ourselves set up, and at no little cost, too, between Brussels and Paris. There are men who lie in ambuscade along the frontier, armed to the teeth, and whose business it is to throw difficulties in the way of transporting merchandise from the one country to the other. They are called Customhouse officers, and they act in precisely the same way as ruts and bad roads.

Further update from Foreign Policy (h/t reader JohnC): “In an e-mail exchange with NPR Music, a Customs official says no musical instruments were involved in the CPB’s actions — a claim not offered to FP. The story indicates that fresh bamboo was found in the luggage separate from Razgui’s 11 flutes. However, when American Airlines eventually delivered Razgui’s luggage, it did not contain the flutes. If both claims are true, it remains a mystery as to what actually happened to the flutes and why they didn’t show up in his luggage.” (& Greenfield, Above the Law) More: Zenon Evans, Reason.

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“The vices of the rich and great are mistaken for error; and those of the poor and lowly, for crimes.” (attributed to the Countess of Blessington) The main scientific reason (if it can be called that) cited by the Food and Drug Administration seems to be that adding menthol makes smoking more enjoyable to many users, leading to readier “initiation of the smoking habit.” [Atlantic Wire] In addition, the World Trade Organization ruled last year that it was an arbitrary trade restriction for the United States to have banned clove-flavored cigarettes of the sort formerly imported from Indonesia, as Congress did in the Tobacco Control Act of 2009, without also banning menthol-flavored cigarettes. [Jakarta Post]

More: Get ready for a huge boost to the already-thriving cigarette-smuggling business should the plan go through [ACSH] And from Arthur Caplan at Time: “Antismoking Advocates Have Misused Science.”

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An old story, alas

by Walter Olson on July 17, 2013

Groups that hold themselves out as representing the interests of consumers don’t tend to represent actual consumers’ interest in free trade [Sallie James]

The Jones Act, which forbids coastwise trade in goods or passengers between American ports except in U.S.-made, U.S.-staffed, U.S.-owned vessels, has developed into a quintessential special interest law. It’s why Maryland and Virginia “bring in road salt from Chile rather than Ohio;” why Jacksonville, Fla. relies on coal from Colombia rather than U.S. sources; and why the economies of Hawaii, Puerto Rico and Guam are perpetually hobbled by high input costs. [Malia Blom Hill, Capital Research Center] Does it at least strengthen U.S. defense by preserving a defense-relevant merchant marine sector? The signs on that aren’t good either. [Eftychis John Gregos-Mourginakis and Joshua Jacobs, NRO; followup]

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Should the feds be trying to seize the 46-foot sailboat Janice Ann? [John Ross, Daily Caller]

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The Supreme Court ruled that the first-sale doctrine of copyright law protects the rights of someone who buys books abroad for resale here, whether or not the publisher approves. [Kirtsaeng v. John Wiley & Sons: Joe Mullin/Ars Technica, SCOTUSBlog, Margot Kaminski/Concur Op ("this is all statutory interpretation" and subject to change by Congress; conflict with existing international trade agreements), earlier here and here] More: Chris Newman.