Recession-Boosting Protectionism
This WSJ article and this USA Today piece report on separate examples of a single trend: Sharply rising raw-material costs are starting to hurt the construction and home-remodeling businesses, which have helped sustain the economy through recent tough times.
The Journal reports on rising lumber costs: "The wholesale price of low-grade boards and plywood used in home-improvement projects like decks and additions is up 24% from June of last year, according to the government's producer price index. An ordinary eight-foot-long, two-by-four, a common type of lumber used for building construction, costs $2.95 today, up from about $1.85 in January 2003."
And USA Today surveys the crippling effects of a growing shortage of cement: "A recent survey of purchasing managers found cement and concrete, which is made with cement, were in short supply in July for the third consecutive month, according to the Institute for Supply Management. And while statistics show cement this month is selling for more than $84 a ton, up nearly 2% from a year ago, anecdotal reports suggest the increase is much larger, according to the Engineering News-Record, a publication that tracks construction costs.
Buried deep in each article is a barely noticed angle. Each of these trends is exacerbated by protectionism directed at our closest neighbors: a 27 percent tariff on Canadian lumber, dating to May 2002 (thanks, Bushies), and a 40 percent tariff on Mexican cement, dating all the way back to 1990 (thanks, other Bushies). To retaliate against Canadian and Mexican producers for charging low prices, the U.S. government is imposing special taxes on construction, depressing production and reducing employment. Always bad policy, this protectionism is particularly stupid right now.
The construction industry is lobbying to have cement tariff temporarily lifted. The Mexican competition wouldn't even hurt U.S. cement makers. It would replace imports from Asia that are increasingly going to China instead.
The construction groups claim there is enough excess cement in Mexico to put a large dent in the U.S. shortage if the cement could come in unencumbered. Plus, the [National Association of Home Builders] says, the impact could be felt quickly, noting it takes only four days for cement to be imported into the USA from Mexico, less than one-tenth of the time it takes for the product to come from Asia.