Brazil’s Computer Police Show the Absurdity Protectionists Have Been Willing to Steep To

      As is well-known at this point, Donald Trump is once again going to be the Republican Party’s nominee in 2024. Having shown an opposition to free trade to be the single principle he has always shown unrelenting dedication to, he famously started a trade war with China in his first term to show his determination in this matter, among much other shenanigans. Despite all the negative economic consequences of these actions and the lack of any economists supporting his mercantilist views, he plans to double down on the tactics should he return to the White House in 2025. He has said that, along with a 10% tariff on all imports, he will impose an astronomical 60% tariff on all imports from China. That country that has famously became such a manufacturing giant that it has been dubbed “The World’s Factory”. Americans overwhelmingly buy goods that have “Made in China” printed on them due to their lower prices than alternatives. Now imagine that all the goods that Americans rely on from this country suddenly got 60% more expensive. That it was Donald Trump is proposing and, unfortunately, Joe Biden is so unpopular that it just might become a reality for the American people. All the same, it is a fascinating scenario in the sense that it could very well bring back an American tradition from colonial times: smuggling. Americans in the past have been quite happy to avoid customs duties that were well below 60%. Alexander Hamilton famously created the Coast Guard specifically to catch smugglers, so that the duties imposed by the Tariff Act of 1789 could be collected, after all. If Trump makes all imports 10% more expensive and Chinese goods 60% pricier, will that American tradition return? If so, how will it be dealt with? The experience of Brazil in the 1980s and their attempt to nurture their nascent computer industry provides a possible blueprint and, as can be expected with government intrusions into voluntary exchange, it would not be a pretty one to try and replicate. 

                                     

     For some context, in the late 1970s, Brazil embraced Alexander Hamilton and/or Friedrich List’s infamous idea of infant industry protection for their burgeoning computer industry. In order for their computers to be ready for export, as well as for ostensible national security reasons, the military junta that would rule the country until 1985 decided that it would place stringent restrictions on imports of foreign computers so as to give breathing room for the domestic industries to get off the ground. Perhaps as night follows day, stringent restrictions were followed by an outright import ban in 1984. Starting under a dictatorship, but continuing into Brazil’s return to democracy in 1985, Brazil’s government showed an almost comical dedication to making sure that computers used in their country were made in their country. As Amal Sanyal explains in his 2017 book Economics and its Stories: 

“Brazil was serious about developing a world class computer industry and the law was enforced zealously. The government set up ‘computer police’ who would search business premises, offices, and universities to hunt out foreign computers and mete out appropriate punishments to offenders.”

 In short, the experience was much the same as how the DEA enforces the War on Drugs, but rather than on harmful substances, it was enforced on everyday people who dared use the more efficient and cheaper foreign computers. Thankfully, this absurdity ended in 1992 after Fernando Collor de Mello made repealing the ban a part of his successful presidential campaign in 1990.

        The relevance of all this to modern America? While thankfully not proposing an outright import ban of goods from China (at least, not yet), the effect of Trump’s proposed 60% tariffs could very well be the same. Perhaps companies will avoid the ban by simply importing the Chinese goods into Mexico or Canada and then bringing them into America. But what if that is too expensive for some American importers? Are they simply going to pass on a 60% price increase to their consumers? Will smuggling be completely avoided? This seems highly unlikely. Will Trump feel compelled to repeat what Brazil’s governments did with computers and have arbitrary searches by police for Chinese goods that did not have exorbitant import taxes paid on them? Would such a task even be possible? Prohibition and the War on Drugs show the great track record of the U.S. federal government to disrupt voluntary exchange.

        How would the Trump and his protectionist supporters respond to all this? No doubt they would say that the tariffs will cause the manufacturing to come back from China or that new manufacturing companies entirely would emerge. Trump’s admittedly good idea of further lowering the top corporate tax rate to 15% would likely be brought up as an extra reason why. Given automation, it is possible that this would result in some industries, but almost certainly not all. Given his willingness to use ICE to stop the illegal entry of immigrants, is it too much of a stretch to say he’d use similar police power to crack down on smugglers if his central planning delusions don’t pan out, as they almost certainly will not? Perhaps, like with the protectionism on Brazilian computers, domestic and foreign opposition to sky-high tariffs would be enough to get Trump to roll back on the policy, but who can say? It seems the best course of action would simply be for Congress to roll back the President’s ability to unilaterally slap tariffs on imports before he can ascend to office a second term. Then, it would be up to Congress to decide if America should shoot itself in the foot to spite China. Fear of a “Chinese goods police” might just motivate the mostly free trade-supporting legislature to do so.