Rethinking Jack Davis and free trade

[moonshine]

In the past I've railed against Jack Davis' inability to grasp basic economic theories. Tariffs, otherwise known as taxes, fail to protect American workers, hasten the exodus of American businesses, and drive up costs to consumers. Today while I was listening to him on Kevin Hardwick's show I realized his policies would have little to no effect on the American economy. In fact, it might be best to embrace his candidacy. The reason is trade logistics. Here's a birds-eye view of why his tariffs would be ineffective...

All trade between countries must clear customs and be attached to documentation stating the origin of the shipment. See the Official Harmonized Tariff Schedule at the USITC for details of how each country is treated:
http://www.usitc.gov/tata/hts/index.htm

Now, it is very easy to craft legislation that says that all electronic goods from China must incur a 40% tariff, but there are methods to eliminate the origin of goods, namely Free Trade Zones. A free trade zone allows goods to be imported to a country, then repackaged or modified, and forwarded to another country. When the goods are repacked the original country of origin is abstracted and no longer relevant when the cargo reaches a US port. It appears to originate from the country hosting the free trade zone. Let's look at a simple example:

Walmart wants to import 100,000 DVD players from a manufacturer in Guangzhou, China. Normally Walmart and XYZ China Corp would agree to the terms, the shipment would be received at US Ports, broken into smaller parcels, and shipped to the point of destination such as the Walmart location on Niagara Falls Boulevard. Then Jack Davis comes along and sponsors legislation to charge walmart a 40% tariff on all DVD players from China. Would Walmart ever pass this cost along to their consumers? Hell no! Walmart would simply contract a freight forwarder and supply chain management agent in Colon, Panama to repackage the product and forward it to the US at a 0% tariff rate. Would costs increase? Slightly, but only by a fraction of a percent, and that would be offset by increased purchasing power of consumer in Panama. The additional transportation and freight forwarding costs would be negligable. The supply chain would be interrupted by ONE DAY! In essence, Walmart would divert their imports, pay a marginal markup, then continue business as usual.

Unless the US is going to impose a tariff on EVERY country in the world Jack Davis' policies are impotent. Thank God!

For more info on the second largest free trade zone in the world in Colon, Panama see the following website:
http://www.colonfreezone.com/

Since Davis' policies won't amount to squat, it might be best to support him in order to eject Reynolds from office. Imagine, a free trader like myself siding with Davis!

[tronix75]

Good observation, that's exactly what happens when there are free trade zone countries or countries that have low tarriff agreements.
High tarriff's on imports as a protectionist scheme isn't realistic in a global capitalist market.
Reynolds is a protectionist also, but he's wrong on all the other issues too, where Davis is right on most of the issues except trade.