Commentary: A tale of protectionism
Time to revisit ‘Cowlandia’ for a cautionary tale on protectionism.
By Nevil Speer
Several years ago, I wrote a column titled “The Tale of Cowlandia.” Given the events of the past several months, I thought it’d be useful revisit that column – along with some revision to add more color and context to the original theme.
The column was intended to demonstrate the power of free trade; after all, political borders are not indicative of economic relevance. That’s precisely why the Founders included the Commerce Clause in the U.S. Constitution; it removed any/all trade barriers between the states and effectively serves as the cornerstone of American prosperity. That same principle pertains to international trade. (For more, see “Principles or Protectionism.”)
No doubt, some will find it objectionable (because they did the first time around), but I hope most readers, at the very least, find it thought-provoking.
Cowlandia was a large, wealthy, sovereign nation possessing vast expanses of both farm ground and native pasture. And its climate makes it especially conducive for raising cattle. Cowlandia was world renowned for its cattle economy (beef cows actually outnumbered citizens) and considered to be a primary source for both high-quality purebred and commercial cattle.
However, there existed some long-standing consternation regarding imports of both cattle and beef. For instance, seedstock breeders would regularly import commercial cows to use as recipients in their embryo transfer programs. Meanwhile, the country possessed minimal cattle feeding and processing capacity – hence, the overwhelming majority of Cowlandia’s beef was imported. That didn’t sit well with some producers who fretted about the nation’s sovereignty and self-sufficiency.The murmuring eventually caught the attention of a presidential candidate. His campaign platform promised to restrict imports of cattle and beef. And once elected, he followed through by declaring a moratorium on cattle imports and imposed steep tariffs on all beef imports. The fallout was immediate.
First came calls from seedstock producers. Some of them had relied on coordinated supply channels for recipient cows – that was now being disrupted. Simultaneously, Cowlandia’s network of small feeders and grow yards also grumbled as they scrambled to establish new sources of feeder cattle.
But more broadly, the public quickly grew uneasy with the new tariffs that were now making their favorite menu item more expensive. But the president wouldn’t listen, his talking point being: “We need to protect the industry – it will enrich us all.”
But of course, just the opposite was happening. Not surprisingly, retaliation from Cowlandia’s trade partners went into effect immediately. First, there were tariffs placed on cattle sourced from Cowlandia. Second, some partners further retaliated with non-tariff trade barriers (i.e., more stringent animal health requirements and paperwork). Demand for Cowlandia cattle fell sharply. Cattle producers experienced an immediate decline in value.
And because trade flows were now restricted, logistics also became problematic. In the absence of cattle imports, potential backhauls to Cowlandia essentially disappeared. Finding trucks was hard enough; the new trade regulations made freight even more difficult and expensive. And all that compounded a growing backlog of feeder cattle supplies in the country (further hampering prices).
Trade retaliation came in other forms, too. For example, some neighboring countries put tariffs on Cowlandia’s sizeable exports of small grains (recall the country had vast resource of farm ground, too). Moreover, the country was also known as a prominent supplier of alfalfa hay; many countries started disallowing importation of hay products from Cowlandia.
The economic impact spread from there. For instance, Cowlandia was also celebrated across the globe for its glorious national parks, which hosted nearly 7 million visitors annually. Tourists began to boycott the country.
Moreover, Cowlandia was home to a vibrant oil refining industry. However, the industry was highly dependent on imported oil, and its primary trade partner subsequently imposed export duties on oil headed to Cowlandia. It didn’t take long before the refineries were laying off their employees – which further rippled throughout Cowlandia’s economy (not to mention resulting in higher fuel costs).
Remember, all of this was done to bolster the cattle and beef industry, but it had precisely the opposite effect: Subsequent capital investment in the cattle industry began to shrink. A wide variety of infrastructure entities (e.g., equipment dealers, farm stores, etc.) systematically began to disappear. The restrictions also translated to declining land values. Cattle producers previously looking to move to, or expand in, Cowlandia opted to do so elsewhere. Last, no viable plan was in the offing to bring cattle feeding and beef processing infrastructure to Cowlandia AND make it cost effective.
Needless to say, the import restrictions choked off Cowlandia’s cattle economy – and its producers – from opportunities previously available to them. Ultimately, Cowlandia’s story worsened from there, with implications affecting every citizen, both directly and indirectly. The list of unintended consequences grew exponentially.
But then…! The President decided to learn about the principles of trade economics and subsequently reversed the protectionist measures. That made all the difference. Business eventually got back to normal. Economic freedom (free markets inside and opportunity for free trade outside) resulted in everyone being better off – most especially Cowlandia’s cattle producers.
“Most anti-globalists want two inconsistent things. [1] They want immunity from the forces of economic change and [2] they want the goods and services that market capitalism makes possible. They cannot have both.”
