Inviting an Endless Cycle of Tit-for-Tat Tariffs?

There are some fascinating discussions going on here, and an embarrassment of riches when it comes to potential directions to take the conversation. One barely knows where to jump in. At the risk of being unimaginative, I’d like to return to a couple of the nuts-and-bolts practical questions I raised in my original reply. In particular, I’d like to posit a scenario and hear what you all think of this.

Let’s for a moment forget about Sudan, where American companies are already forbidden from operating. Let’s instead take Equatorial Guinea. We all agree this is one of the world’s most unpleasant governments. We all agree that “theft” is not an overly enthusiastic label to attach to the actions of Obiang. We don’t need Freedom House to tell us this. But who is actually buying Equatorial Guinea’s oil? The Chinese, to some extent, but largely it is the United States. And who are the oil companies operating in Equatorial Guinea? ExxonMobil, Amerada Hess, Marathon, and a host of smaller American independents account for virtually all of Equatorial Guinea’s exploration and production activity. And when that oil arrives in the United States, it is refined and sold as fuel for powering the American economy, or it makes its way into various stages of the American manufacturing industries.

Now, let us say we have just passed the Clean Hands Trust reforms that are being proposed. It is suddenly impossible to escape the conclusion that we here in the United States are producing products for export that have been made with “stolen” crude oil from Equatorial Guinea. So what now? Who is going to introduce a tariff on American products? Will it be the Chinese, who clearly are going to have worked up a nice healthy appetite for retaliatory action following the whopping tariffs we’ve just imposed on them over Sudan? Will it be Venezuela? Will it be a Russian government keen to make a political point about U.S. “hypocrisy”? Or, perhaps most worryingly, will it be some nice European government that — quite reasonably — is uncomfortable with the idea of one standard being applied to China and another one to the United States?

Perhaps I am being too much of a Chicken Little. I am prepared to accept Dr. Wenar’s point that this proposal is meant to provide incentives for good behavior, rather than create a world trade environment burdened by a host of new tariffs. Indeed, perhaps I am being unduly blinkered in my approach, and ignoring the fact that there is a clear moral imperative here. Perhaps I would feel differently if we were talking about actual human slavery here, and perhaps I am skeptical only because I happen to feel the “genocide” label is not an accurate one to apply to the situation in Darfur (but that’s clearly a separate discussion). However, I just can’t help feeling that, in the cold hard light of day, we are simply inviting an endless cycle of tit-for-tat tariffs introduced in a highly politically charged atmosphere in which every country has a slightly different idea of whose hands are and are not “clean.”

I also still think that once you start to move more than one or two steps away from the “scene of the crime,” as it were, it becomes very difficult to make a moral case for punishment. I admit I am way out of my depth talking about moral philosophy, though, and Kit Wellman will probably set me straight on that. Ultimately, I suppose, I tend to agree with Andrei Illarionov that if we can establish that someone has committed a crime, then we should make it our priority to find a way to punish the actual criminal — rather than devising a complicated scheme that is potentially disruptive to global trade, in an (admittedly noble) effort to punish the people buying and selling goods that happen to have been manufactured using some small element of “stolen” material. But again, I am prepared to be convinced that I am being overly cautious here.

Also from this issue

Lead Essay

  • We All Own Stolen Goods — and How Defending Property Rights Can Help the World’s Most Oppressed People by Leif Wenar

    Developing countries with massive oil or mineral reserves are often wracked by corruption and strife as their would-be rulers jockey for control of the resources that can make them immensely wealthy. But these resources, argues political philosopher Leif Wenar in this month’s provocative lead essay, belong to the people of these countries — some of the poorest people in the world — not their rulers. So trade in these resources amounts to trade in stolen goods. Wenar argues that we must “enforce property rights directly” by taking “legal action in U.S. jurisdictions against the middlemen who trade Americans’ dollars to the worst regimes in exchange for stolen resources.” Because this cannot stop “resource cursed” countries from trading with less enlightened countries, such as China, Wenar additionally proposes a tariff on imports from China (or from whatever country is receiving “stolen” resources), the proceeds of which are to be held in trust for the rightful owners of the resources, and disbursed to those people in the event of their government’s reform. “The priority in reforming global trade,” Wenar argues, “must be to lock in the rights that define the market order. The first step in improving the prospects of poor people is to enforce the rights they already have.”

Response Essays

  • The Wenar Proposal vs. Realpolitik by John Ghazvinian

    While lauding the goal of Leif Wenar’s proposal for fighting the effects of the resource curse, John Ghazvinian, author of Untapped: The Scramble for Africa’s Oil, questions its practicability. When it comes to determining which governments meet the threshold of a “minimally decent and unified government,” Ghazvinian worries about the possibility that “this process will become deeply politicized” or “simply reduced to who has the best PR apparatus.” Ghazvinian suggests that requiring a government to be unified, though intended to stave off civil war, may “have the opposite effect” by providing “any aggrieved minority the power of an instant veto-risking destabilization in what are often already unstable countries.” Wenar’s “anti-theft” tariff, Ghazvinian argues, seems unlikely really to be seen as distinct from other tariffs and so will introduce just another complicating factor into the realpolitik of trade negotiation.

  • The Resource Curse and Leif Wenar’s “Clean Hands Trust” by Christopher Wellman

    Washington University political philosopher Christopher Wellman praises Wenar’s proposal for fighting the resource curse, but he criticizes the idea of a “Clean Hands Trust” on the ground that it “requires too LITTLE, not too much” of those of us involved in the market for natural resources “stolen” from their rightful owners. Wellman argues that the “Clean Hands Trust” is analogous to a slave-owner attempting to rectify his wrongdoing by offering the slave a large sum in compensation. “If the slave owner cannot clean her hands by paying the slave after the fact,” Wellman asks, “then why should we presume that the person who buys slave-produced cotton from a slave owner can clean her hands by paying the slave after the fact? And if the person who buys morally tainted cotton cannot clean her hands in this way, why think that those who buy inexpensive shirts constructed from slave-produced cotton can clean their hands by subsequently reimbursing the slaves?” Similarly, he argues a Clean Hands Trust would fail really to clean our hands.

  • To Punish the Guilty by Andrei Illarionov

    Cato senior fellow Andrei Illarionov, a former chief economic advisor to then-Russian President Vladimir Putin, argues that there is nothing special about the “resource curse,” which represents just one among many kinds of theft by corrupt political elites. According to Illarionov, Wenar fails to make a principled distinction between the actions of the political leaders of Equatorial Guinea and those of Russia that would motivate restricting trade in goods from the former but not the latter. Illarionov argues that the precedent of treating a country’s natural resources as belonging to its people is the problem, not the beginning of a solution. In practical political reality, the idea of collective national ownership of resources often translates directly into nationalization and control by political elites. Additionally, Illarionov argues that the trade sanctions Wenar proposes would punish innocent citizens who already suffer under corrupt rulers. The issue, he argues, is not a matter of what is stolen, but how we will treat those responsible for theft.

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