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India Makes The Steel Tariff Mistake Again.

Date: 28-11-2016
Subject: India Makes The Steel Tariff Mistake Again

Much economic reform is being done in India and this is all to the good. The population will, in the future, be richer as a result of the changes being made. However, India still doesn’t quite get the point of trade. And this is leading the country to make the same mistake again on steel imports. They’re adding a tariff to cheap steel imports–this is a mistake because the entire point of trade, the very purpose of it, is to get our hands upon cheap imports. Yes, really, imports are the part of the process that make us richer. So, to tax ourselves with a tariff to stop ourselves getting cheap imports is simply ridiculous. It’s common I agree, but it’s still ridiculous:

India has imposed anti-dumping duties on hot rolled flat sheets and plates of alloy or non-alloy steel to curb cheaper imports into the country, a government notification said on Thursday.

  "The government will gradually lower the duty from 10 percent this year to 6 percent by 2019, the notification said.

This is simply the wrong thing to be doing. We know why it happens but it’s still simply the wrong thing to do:

"India imposes safeguard duties on some steel product imports from Nov 23, 2016 to May 22, 2019

The “safeguard” there is to protect domestic producers from the impact of those cheap imports.

  "Government has slapped safeguard duty on import of certain steel products to protect domestic manufacturers from cheap in-bound shipments.

Again, I insist, the wrong thing to be doing. Why it happens is well known. The producers are a small number of people but a small number of people who are very, very, interested in being protected from competition. The users of steel are everyone in the country. Who are only very mildly interested in the price of steel. Sure, we all use some every day but if the price of steel doubled, or halved, it would make very, very, little difference to us. A refrigerator might cost $5 more or something and how often do we buy one of those? But those steel producers are very, very, interested in this price. And it is always true in politics that a concentrated interest will defeat a dispersed one. Thus producers generally win on the subject of trade tariffs and consumers lose.

All of which is why we’ve got to decry this protectionism each and every time we see it. We’re supposed to be running the economy in the interests of the consumers, not the producers. And no tariffs, yea in the face of cheap imports, even dumping, benefits consumers. Thus we should never have tariffs against imports, no matter how much the producers complain and whine.

Source: http://www.forbes.com/

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