Source: http://worldcityweb.com/home/MIA/publications/magazine/29/696/

President's note: Shining a light

by Ken Roberts

Shining a light

For the United States, the path to free trade may still need illumination.

More than 150 years ago, the liberal French economist and politician Frdric Bastiat created a parody that has come to be known as the Candle Makers’ Petition. In it, candle makers ask the French government to protect them from unfair foreign competition that undercuts their prices and would irrevocably harm their industry.

The “foreign” competition is the sun.

Fast forward to 2006. The U.S. Commerce Department, at the behest of the National Candle Association, its members and a number of gullible senators, has reaffirmed protectionist measures first set in motion in the 1980s for the U.S. candle industry. Candles from China carry a 108 percent tariff.

Let me now focus on just how inane this is.

First, the loser is the U.S. consumer. Think of that when the lights go out this hurricane season. Every time the U.S. government protects an industry whether it is Big Steel, Big Agriculture, Big Textile or Big Whatever you pay and I pay.

Second, while China leads all countries when it comes to U.S. imports of candles, China’s market share has actually decreased from almost 34 percent a decade ago to about 30 percent last year. Through the first four months of this year, that percentage is down to 15 percent, according to the latest government figures. My guess is the Chinese saw the writing on the wall.

Third, U.S. candle makers are not likely to benefit. They still face competition from Canada, the No. 2 supplier of candles and a country for which market share has risen to 27 percent this year from just under 21 percent in 2002. Vietnam and India are also big candle suppliers. Vietnam’s slice has grown to 12.4 percent from 0.0013 percent. India, meanwhile, is up from less than one-tenth of 1 percent to more than 8 percent. In fact, 56 nations shipped candles into the United States last year, more than ever.

Salmon farmers in Maine and the Pacific Northwest made a similar effort several years ago. They complained of unfair competition from Norway. Suddenly, salmon started pouring into Miami: Chile had acquired a competitive advantage.

The image that comes to mind, with both candles and salmon, is the little Dutch boy trying to save the dam by plugging a leak with his finger.

The problem with protectionist measures is that they are far more attractive when the industries, companies and jobs being protected are close to home. They affect real people and real families.

That’s why protecting Florida’s citrus and sugar industries from Brazilian competition, even at the expense of derailing the Free Trade Area of the Americas agreement, seems to make sense to so many in Florida.

An interesting side note to the candle story. One of the most venerated companies in the candle industry is 150-year-old Will & Baumer, which was founded in Syracuse, N.Y., the cradle of the U.S. candle industry. It is now the largest candle maker in the world, it has supplied the Vatican and it is a dues-paying member of the National Candle Association. Sen. Hillary Clinton in a press release celebrating the Commerce Department’s decision mentioned Will & Baumer as being “located” in New York.

But Will & Baumer is actually now a Mexican company. And Mexico, whether coincidentally or not, has seen its U.S.-bound shipments of candles halved since 1996, while overall U.S. candle imports have more than doubled.