September 22, 2000

September 22, 2000 | Commentary on Foreign Aid and Development

Will Congress Impose Tariffs On Its Own Citizens?

WASHINGTON-The U.S. Congress is considering imposing tariffs and quotas on its own citizens. Amazing as it sounds, it's true.

While the United States maintains low trade barriers in general, if Congress passes the Made in the USA Label Defense Act, American citizens may face some of the highest trade barriers faced by any foreign country.

At issue are textile and apparel products coming from the Commonwealth of the Northern Mariana Islands-a territory of the United States in the Western Pacific composed of 14 small islands, the native inhabitants of which are U.S. citizens.

Textile companies, including firms from nearby China, are accused by some lawmakers of using the islands as sweatshops and as conduits for shipping goods to the United States tax-free.

The bill would slap import duties and quotas on products coming from CNMI just as if the goods were coming from a foreign country. Passage of such a bill would be unprecedented. The last time the government tried this, we threw a tea party.

The National Retail Federation noted in a letter to Senate Majority Leader Trent Lott that "No part of the United States-including other territories-has ever been subjected to U.S. import duties and quotas on its products."

This bill should be rejected for a number of reasons. First, the bill raises serious constitutional questions. A strong argument can be made that imposing tariffs and quotas on the CNMI would be equivalent to Congress imposing tariffs and quotas on goods produced by U.S. citizens in Virginia, Colorado or Indiana.

The Constitution guarantees equal protection under the law for all citizens and guarantees the government shall not abridge the privileges and immunities of its citizens without due process of law.

But the "Made in the USA Label Defense Act" would discriminate against a group of U.S. citizens based solely on their place of residence. This irrational classification certainly would appear to violate CNMI residents' equal protection and due process rights.

By discriminating against the U.S. citizens residing in CNMI who have no voting representation in Congress, the bill undermines one of the key issues our founding fathers fought over: taxation without representation.

Second, this bill should be rejected on economic grounds. American citizens residing in CNMI would suffer enormously, as the islands are highly dependent on the textile and apparel sector.

Imposing tariffs and quotas on goods coming out of CNMI would increase unemployment, which currently stands at 14 percent, and increase the islands' dependence on the federal government.

CNMI has made great progress in establishing independence and relying less on federal aid. Passing this bill would be a step backward in achieving self-sufficiency, which is in the interest of both the inhabitants of CNMI and the mainland American taxpayers who support the islands.

The majority of Americans who reside in the 50 states would suffer harm through passage of this bill in another way. Currently, CNMI exports about $1 billion worth of textile and apparel products duty free to the United States.

Imposing trade barriers on the islands would raise costs of textile and apparel products for the average American consumer. Supporters of the bill argue that labor rights abuses and textile transshipments-shipping products through CNMI to avoid U.S. tariffs and quotas-warrant this legislation.

However, a recent Government Accounting Office report found "no evidence of diversions or transshipments." To address the labor rights abuse issue, the Department of Labor and the Occupational Safety and Health Administration maintain staff on the islands to monitor and make sure such abuses are not taking place.

Moreover, labor abuses have become such a politically sensitive issue in the United States that many U.S. companies have implemented strict compliance programs to ensure goods are manufactured so as not to violate U.S. labor laws.

The federal government should not be passing laws that clearly harm the economic well being of its own citizens. Nor should it place tariffs on them. Otherwise, we will repeat a sorry instance of our history and repeat a wrong-taxation without representation-for which our founding fathers were willing to go to war.

Aaron Schavey is a policy analyst at the Heritage Foundation (www.heritage.org) a Washington-based public policy research institute.

About the Author

Aaron Schavey Policy Analyst
Finance and Accounting

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