Everyone is familiar with this scenario: A company executive requires employees to use a specific vendor for company purchases:
- NOT because that vendor is the most qualified;
- NOT because that vendor provides the best product or service;
- NOT because that vendor provides the best customer service;
- NOT because that vendor has the best price;
But because the company executive is related to, or friends with, the vendor.
We call that nepotism, and it’s defined as “the practice among those with power or influence of favoring relatives or friends, especially by giving them jobs.” The practice is universally derided as unfair, unethical, inefficient and costly.
And in government it’s often illegal—except when it goes by the name of trade protectionism.
Democratic presidential nominee Hillary Clinton recently told a group in Pennsylvania: “I’m sick and tired of us having an open market where everybody gets to sell to us, and they often do it at lower costs, undercutting our workers, our businesses. That’s not fair and it’s not right.”
So American consumers are able to choose the best value for products and services to meet their needs from vendors all over the world, and Clinton thinks that’s a travesty. And she’s going to do her best to make you buy from those industries and unions she prefers—i.e., that supported or donated to her or the Clinton Foundation.
Let’s call it “trade nepotism.”
How will she accomplish her goal? She might impose import tariffs—i.e., taxes that make products more expensive for consumers to buy—but there are other ways.
For example, in 2004 Congress passed with strong bipartisan support the American Job Creation Act. It currently provides a 9 percent tax deduction for manufacturers. Clinton might try to eliminate or reduce that deduction for companies that aren’t buying from her friends. (Note: That same legislation only provided a 6 percent reduction for the fossil fuel industry; so treating manufacturers differently has already been done.)
The fact is that American manufacturing is flourishing as it transitions to sophisticated, high-value products and services—because that’s what we’re good at.
Clinton’s trade nepotism would take us back, not forward. Consumers would lose, and so would the U.S. economy.