Economists frequently describe protectionism as politically feasible due to its concentrated benefits and dispersed costs. Sugar protectionism, however, has concentrated costs:

Producers of hard candy, such as Primrose and Brach’s, which closed its Chicago plant in 2004 to move its operations to Mexico, blame their shifting production strategies on one culprit: U.S. sugar subsidies that keep prices of domestic sugar much higher than prices on the world market. In addition, tight import quotas make it hard to import cheaper foreign-produced sugar.

“We haven’t seen a hard-candy company expansion or new factory for many years,” said Rob Hoffman, director of business development for World Business Chicago. [WaPo]

Update: See this post for more information about sugar protectionism.

Occasionally President Bush acts like someone that appreciates free trade:

Beijing has welcomed a decision by US President George W Bush to reject a commission recommendation that called for anti-dumping quotas on imports of Chinese steel pipes… The US International Trade Commission found in October that Chinese producers were dumping imports of circular welded non-alloy steel pipe on the US market at unfairly cheap prices. ITC chairman Stephen Koplan recommended that Bush impose an annual quota of 160,000 tons on such steel imports for three years. Bush argued, however, that action to curb imports would encourage other countries to step into the market and would only serve to drive up costs for US steel consumers. The action was a rare respite from Washington’s usually highly critical stance about the state of US-Sino trade relations as exports from the Asian giant have soared on the back of its surging economy. [The Standard]

Moreover, Ben Muse notes that it looks like the Byrd Amendment will be dead by late 2007.

The House of Representatives’ version of the budget reconciliation bill contains a measure that repeals the Byrd Amendment, a protectionist statute passed in 2000 that encouraged rent-seeking by distributing anti-dumping revenues to companies that filed grievances. The Senate budget bill does not contain such a measure.

Over two dozen senators have signalled their intent to fight in support of the Byrd Amendment. Rep. Jim Ramstad, a Minnesota Republican, has called the program “the ultimate combination of protectionism, corporate welfare and government waste.”

I just discovered another objection to the infant industry argument. In a 2002 paper, Donghyun Park and Jung Hur demonstrate that a protected firm’s ability to export is not necessarily evidence that it is reaping the dynamic gains (economies of scale and learning-by-doing) touted by import substitution proponents.

In this note, we use simple graphical analysis to examine whether exports per se are evidence of the success of an IS trade policy regime. Our analysis indicates that it is possible for an IS industry to export even without the dynamic effects associated with the infant industry argument, according to which a domestic industry protected under IS eventually grows up to become internationally competitive.

In our analysis, the IS monopolist becomes more efficient only in the very limited sense that it moves down a given average cost curve, which remains above the world price everywhere. However, there is no growing up in a more fundamental sense of the infant industry argument – i.e. the IS industry’s price becoming competitive with world price. Indeed, in our analysis, the IS industry faces little incentive to grow up.

Therefore, exports per se do not necessarily tell us about whether IS enabled an industry to achieve significant efficiency gains over time. In fact, we showed that protectionism and economies of scale can combine to render exporting profitable for an IS monopolist that inherently cannot compete in world markets. Our analysis provides some grounds for caution in viewing exports as evidence of successful IS.

After the conclusion of the Uruguay round, the year 2005 was supposed to herald the launch of the quota-free era of textile trade. The EU and US have now both completed agreements with China to impose quotas upon its textile exports . What are we to expect from the Doha round?

UPDATE: Peter Gallagher explains in detail why everyone loses.

European and American officials are reportedly headed to China to discuss relaxation of their respective barriers to Chinese textile exports.