Bootleggers and Baptists Agree to Restrict Trade with China

When the President and Congress consider trade legislation, a wide range of interest groups gather to advance their agendas. These agendas are not always obvious, and sometimes corporate and union interests misdirect the public about their motivations.

• Unions want to protect union jobs in the U.S., and extract revenues for retraining workers displaced by imports. Here is the AFLCIO’s page on why it opposes the TPP (Trans-Pacific Partnership for Free Trade), a trade agreement Congress long considered, before it was blocked by the new Administration).

• Corporations and industry associations lobby the Commerce Department for new dumping charges and for countervailing duties (AD and CVD, discussed in past post and evidence brief: Affirmative Case: Repeal Section 421 Tariffs on Chinese Imports). Recent story: “US Targets Chinese Aluminum Industry at the WTO With a New President in Town,” (MetalMiner, January 26, 2017)

• Environmental organizations work to add their environmental goals to trade agreements. Here is the Sierra Club’s page opposing the TPP (and other “dangerous trade agreements”). This page includes a Sierra Club video with claims against the TPP, including the claim that allowing exports of coal and natural gas from the U.S. would be dangerous.

• Human rights and women’s rights groups advocate trade restrictions to pressure China and other countries to reform. Here is a 2013 article focused on China: “China: The West Needs to Promote Both Trade and Human Rights.” The article notes the danger of mixing rights advocacy with trade policy:

Some, both in Europe and the U.S., are demanding a much tougher approach towards China, including the imposition of punitive sanctions and high import tariffs. But this is undeniably motivated more by a desire to protect vested domestic economic interests, rather than as a way to put political pressure on the Chinese government. Crucially, such an approach risks fueling the perception that the voicing of human rights concerns is only used as a means of criticism in order to justify protectionist measures against China.

• Christian groups consider trade policy a way to pressure China’s government to increase religious freedom. Robert Sirico, in a 1998 Cato Trade Briefing Paper notes:

The freedom of Americans to trade and invest abroad is being challenged in the name of promoting human rights. Conservative Christian activists and others seek to impose trade sanctions against nations that do not protect human rights. Proposed sanctions include the Freedom from Religious Persecution Act and the revoking of China’s Most Favored Nation status.

“Free Trade and Human Rights: The Moral Case for Engagement”  begins with an overview:

Three fundamental misunderstandings cloud the current debate over free trade and human rights. First, cutting government aid to target countries is not the same as raising barriers to trade and investment. Ending foreign aid and corporate subsidies actually promotes development by removing market distortions. Blocking trade, in contrast, hurts U.S. consumers and exporters as well as the most economically vulnerable people in the targeted nations.

Second, some advocates of free trade in the U.S. business community have weakened their case by failing to acknowledge that human rights abuses exist. U.S. multinational firms further undermine their credibility by supporting government intervention through such agencies as the Export-Import Bank and the Overseas Private Investment Corporation.

Third, Christian conservatives who support sanctions betray a lack of understanding of how trade promotes freedom and development. Economic reforms in China have transformed daily life for hundreds of millions of people who now enjoy greater opportunity, freedom of movement, material abundance, and access to Western ideas. Trade with China benefits Americans through lower prices, wider consumer choice, and greater returns on investment.

Imposing sanctions against China will disrupt this mutually beneficial relationship while doing nothing to improve human rights. Like the failed embargo against Cuba, trade sanctions isolate the victims while strengthening their persecutors. Sanctions imposed in the name of human rights also serve the interest of domestic protectionists by limiting competition. The best policy for promoting freedom and human rights remains economic and moral engagement. 

So… industry, unions, environmental, human rights, and Christian organizations lobby to restrict trade agreements. The story of the Bootleggers and the Baptists can be helpful in sorting out opposition to international trade and to trade agreements.

Climate negotiations offer an illustration of the problem, explained in this PERC page and paper. Though from 1998, the lessons apply to current trade policy issues with China:

As nations argue over global warming policies, PERC economist Bruce Yandle brings fresh insights to the discussion. In “Bootleggers, Baptists, and Global Warming,” a new paper from PERC, Yandle sheds light on puzzling features of the international negotiations over climate change.

Yandle looks at the post-Kyoto negotiations in the light of a theory that he has coined as the “bootleggers and Baptists” theory of regulation. Yandle points out that in the South, Sunday closing laws make it illegal to sell alcohol on Sunday. These laws are maintained by an inadvertent coalition of bootleggers and Baptists. The Baptists (and other religious denominations) provide the public outcry against liquor on Sunday, while the bootleggers (who actually sell liquor on Sunday) quietly persuade legislatures and town councils to maintain the closing laws.

Here is a similar Bootleggers and Baptists story from November, 2014:

In June of this year, EPA administrator Gina McCarthy announced the Obama administration’s far-reaching, anti-coal-burning Clean Power Plan. It drew wide support from the environmental community for its promise to reduce carbon emissions and mitigate climate change. Speaking for environmentalists worldwide, McCarthy said: “This plan will clean the air we breathe while helping slow climate change so we can leave a safe and healthy future for our kids.” Put another way: Those who love their children and the environment would surely leap on President Obama’s anti-coal bandwagon.

Wikipedia entry on Bootleggers and Baptists.

Screen Shot 2017-01-28 at 8.16.49 AMHere similar story “Bootleggers, Baptists and e-cigarettes” (R Street, Jan. 14, 2016)

Environmentalists were happy, but so were producers of other fossil fuels that compete with coal (natural gas producers, for example). Interestingly, dirty coal producers were pleased with the new legislation too. They are the bootleggers of the story.

Before the imposition of the new requirements, producers of clean coal, which comes mainly from Wyoming and Montana, were in the catbird seat because their clean coal met high air-quality standards without the use of expensive technology. But now, with the new technology required, coal-burning plants can burn cheaper, dirty coal. Sellers of dirty coal see their business growing faster while the pace for clean-coal shippers is weakening.

All this gets more interesting when it turns out that dirty-coal producers in Obama’s home state of Illinois are chief among the bootleggers laughing all the way to the bank as they ship trainloads of coal to generators far and wide. The Obama administration’s Clean Power Plan has made lots of people happy — environmentalists, producers of clean-power technologies, and producers of dirty coal. We think the plan should receive a medal for bringing together such a disparate set of bootlegger–Baptist interests, provided it can clean the dirt off, of course. [Link to National Review article.]

Students researching the China topic should note that coal from Wyoming and Montana burns cleaner than coal mined in China and burned for energy production there. Also, shipping costs from Montana and Wyoming to South China coal plants is actually less expensive than shipping by rail to coast then shipping along China’s coast. “Cleaner” coal with lower shipping costs (though coal burning is still more polluting than natural gas, wind, solar, and hydro power).

Environmental groups strongly oppose permits and trade policies enabling Wyoming and Montana coal to be shipped by rail and river to the Washington coast, and exported to China. Dirty coal producers in China and around the world also oppose exports of clean coal from the U.S., but not for the best of reasons.

Wyoming coal: tougher sell with U.S.-China climate deal” (Casper Star-Tribune, Nov 16, 2014) notes the then recent trade agreement hurt Wyoming coal exports:

CASPER, Wyo. — Wyoming coal exports will likely suffer as a result of an agreement by the United States and China to cut carbon dioxide emissions, analysts said Wednesday.

The surprise announcement Tuesday by President Barack Obama and his Chinese counterpart, Xi Jinping, commits the world’s two largest carbon emitters to greening their respective power sectors.

And this Bloomberg News story has more, “China’s Clean-Fuel Focus Tests U.S. Coal-Export Lifeline.”  And with exports from US ports blocked, coal is headed out through Canada, “Coal company shifts to Canadian port to reach Asia markets,” (US News, October 13, 2016)

In all the above stories of special interests and trade policy, we shouldn’t impute bad motives to most of the people and organizations involved. People see the world through their own interests and often persuade themselves that policies they benefit from also benefit the world.

There are people and organization who know policies they benefit from personally and as interest groups will raise costs and limit freedoms for others. Debaters should be alert to see the bootleggers behind various proposed restrictions on trade with China.

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