Regulatory Complexity and Rents

Luis Garicano on the EU-US trade deal.

…The growing regulatory complexity and arbitrariness of the tariff regime provides rents to those connected with power, not to innovators. It is a recipe for the biggest enemy of growth: regulatory overkill and crony capitalism. Consider the example of importing a can of beer from Belgium into the US. There is a 10% country-specific tariff on the entire value of the product. On top of this, the aluminium can itself is treated as a completely separate product, subject to its own additional tariff of up to 50%. The level of this tariff is based on the nearly untraceable origin of the raw metal—the country where the aluminium was “smelted and cast.” The tariff rises to 200% if the country is unknown. This forces an importer to research the obscure global supply chain of a minor component and apply multiple, overlapping tax rates to a single, everyday item.

Many other interesting comments.

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