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Cuban Tariffs: “Bad!” American Tariffs: “Good!”

Written by Gary North on September 1, 2014

Cuba is officially Communist. So, Americans know that the government’s regulations are bad for the people. They understand that Communist government regulations increase the poverty of families, who face much harder times. “Fidel Castro is a bad guy. So is his kid brother.”

So, when they read of import restrictions like these, they know for sure that it’s another mark of Communist tyranny.

Hundreds of thousands of Cubans and Cuban-Americans fly to and from the island each year thanks to the easing of travel restrictions by the U.S. and Cuban governments over the last five years. Their Cuba-bound checked baggage has become a continuous airlift that moves nearly $2 billion of products ranging from razor blades to rice cookers. The baggage carousels at Cuba’s airports often look like they’re disgorging the contents of an entire Wal-Mart or Target store. Many families bring special trailers to carry the bags of their returning family, which often weigh many hundreds of pounds and include items such as bicycles and flat-screen TVs.

But the Cuban government on Monday is enacting new rules meant to take a big bite of that traffic, sharply limiting the amount of goods people can bring into Cuba in their luggage, and ship by boat from abroad. The Cuban government says the restrictions are meant to curb abuses that have turned air travel in particular into a way for professional “mules” to illegally import supplies for both black-market businesses and legal private enterprises that are supposed to buy supplies from the state.

The government has imposed 41 pages of new rules on imports.

The rules that go into effect Monday run 41 pages and give a sense of the quantity and diversity of the commercial goods arriving in checked bags. Travelers will now be allowed to bring in 22 pounds (10 kilos) of detergent instead of 44; one set of hand tools instead of two; and 24 bras instead of 48. Four car tires are still permitted, as are two pieces of baby furniture and two flat-screen televisions. Cuban customs also bars passengers from bringing in items worth more than $1,000. Rather than examining receipts, customs agents are given a long list assigning pre-set values to certain goods ($250 for a video-game console, for example.) Those prices rise sharply under the new rules, making it far easier to reach that $1,000 limit.

I feel sorry for the Cuban people. They cannot get access to high-quality foreign-made goods. Their lives have been made miserable by the Communists, who have ruled Cuba ever since 1959. Most Americans agree.

Now, let us shift the scene. Now, it is an American airport or port city. Foreign goods are pouring in. This leads to a series of reports written by American trade associations on the destructive effects of free trade. The message: “Something has to be done! This is taking away American jobs. The common man is seeing his livelihood destroyed by foreigners, who try to sell their slave-labor-produced goods here.”

What’s the difference? If imports are good for Cubans, why aren’t they good for Americans? If placing restrictions on imports is destructive of the lifestyles of Cubans, why isn’t it destructive of the lifestyles of Americans?

Most people do not understand economics. They understand slogans. Communism is bad. What Communist governments do is bad. Americanism is good. If something the federal government does is defended as true Americanism, it’s a good thing. When it’s the same thing — the same government policy — there are American voters who will decide on the wisdom of the policy in terms of who labels the policy first.

Cuba is mercantilistic. It restricts imports. Its people live in poverty. The United States has lowered import restrictions ever since Kennedy’s presidency. Yet there are voters who have been persuaded by brochures issued by trade associations that reduced government intervention — lower sales taxes — makes America poorer. In terms of economic analysis, they are saying this: “Sales taxes make us rich!” But of course they do not understand that tariffs are sales taxes on imported goods. They do not understand economic theory. What matter is who labels the policy first.

So, which is it? Is free trade a good idea or a bad idea? Some voters make up their minds this way: “Tell me whether it’s Cuban government policy or American government policy, and I’ll tell you whether it’s a good policy or a bad policy.” For them, economic theory is irrelevant. They think of economic theory as confined inside national borders. What is good at one border is bad at another border. “Cubans who cannot buy American goods = bad. Americans who cannot buy Cuban goods = good.” This is why, for 50 years, the American government banned all trade with Cuba. It only eased off five years ago — not under Kennedy, Johnson, Nixon, Ford, Carter, Reagan, Bush I, Clinton, and Bush II. They all wanted the Cuban-American swing vote in Miami.

This is frustrating for economists.

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7 thoughts on “Cuban Tariffs: “Bad!” American Tariffs: “Good!”

  1. Grumpy Old Man says:

    Import and export tariffs are the responsibility of the Federal government. U.S. Constitution Article 1 Section 8. It is my view they should be reasonable and enforceable. For example: 5 to 10 percent of retail price. Any variance to the disadvantage of the U.S. should be assessed at 4 times the variance. You cheat and get caught trying to "profit" an extra $1000? You pay $4000 to the Fed. Enforced fairly and equitably and most importers would abide by the law. The current system is highly suspect.

  2. The Cuban embargo shows how petty and vindictive the “great” United States can be. We drove Castro into the arms of the USSR, even after he appealed to the US for support and backing. His only demand was that we buy Cuban goods for their going market prices and not so cheap that it ended up impoverishing the Cuban population.

    But no, the US wanted another Batista who would screw his own people, allow US interests to rape and strip-mine his country’s resources (just like the corporatocracy we live under today) and lead to another revolution, so we been in a trade “snit” with little Cuba for 50 years. Pathetic.

  3. The whole idea of free trade was to increase competition in the marketplace. Country A's workers, inventors and capital would compete against Country B's workers, inventors and capital and country C's workers, inventors and capital, etc. The way trade agreements have been structured in the past few decades accomplishes the exact opposite. We end with only a few brands producing a given product. There is little competition in the marketplace compared to what that number of choices should be. The persons who claim the modern trade structure to be "free trade" are either ignorant or accomplices of those who orchestrated this lie.

    The only thing that is competed for in the new world order economy is jobs. Competition for jobs means workers make less for their production. Less competition in the number of brands available means higher relative prices. The overall effect is that persons who do little actual good for society (or actual work!), are allowed to profit more than ever while everyone else suffers.

    Incidentally, the purpose of regulation is to further eliminate competition for the giant corporations. Giant corporations can afford roomfuls of lawyers and accountants while the cost of a single lawyer and accountant will stop many small competitors from entering the marketplace.

    I know most or all of you brainwashed automatons will dismiss my arguments and continue to worship at the altar of that which your masters tell you is a free market economy. But at least I know that I gave you a chance to escape from the matrix.

    No man is ever so enslaved as is he who could walk out of his confinement if only he took a few actions, such as opening his eyes and taking a step, yet keeps his eyes closed because his masters tell him there is nothing to see.

  4. Phillip the Bruce says:

    You are correct that the Federal Gunverment is allowed by the Constitution to collect tariffs. That does NOT meant that they are a good idea. The Framers had many good ideas, but they were not perfect. Take a look at how the whole concept of Federal Gunverment being limited by the Constitution has worked out.

  5. Phillip the Bruce says:

    The problem is not free trade, it is "trade agreements." These, by definition, involve gunverment interference in the market.

  6. You are correct and still missing the mark.

    You are correct that actual free trade is not the problem. The problem is that we have trade agreements that are sold as being for the furtherance of free trade, but that actually eliminate competition. How often do we hear the mainstream sources point out that no trade agreement is actually free trade? Aside from Ron Paul, how many politicians highlight this fact? Don’t they almost unamimously hide the fact?

    I would also add that when the whole idea of free trade was imagined originally, the imaginers did not imagine a world wherein the wealthy you rather make one more penny today instead of maintaining an economy in which they could make many more dollars tomorrow and a society in which they could walk down the streets without fear.

    I doubt that they imagined a world wherein one more penny would be more important to the wealthy than patriotism and loyalty to their fellow Americans.

    I doubt that they imagined a world in which it would be so easy to move raw materials around the world in search of the cheapest labor so that competition in the marketplace would be diminished rather than augmented.

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