The Giant Book That Creates And Destroys Entire Industries
Monday, December 2, 2013
"There's our ship!" says Officer Lisa Sacco.
We're standing at the Port of Miami, where Sacco works for U.S. Customs and Border Protection. Our ship, the Hansa Kirkenes, left Cartagena, Colombia, about a week earlier carrying all 6,078 of the Planet Money women's T-shirts.
A crane lifts the container carrying our shirts off of the ship and drops it at our feet. Boom: The shirts have arrived. And yet, in a sense, the shirts aren't quite here yet. It's like that moment when you get off an international flight and you have to wait to go through customs. That's where our T-shirt is now: in legal limbo.
Our shirts have just traveled from Colombia to Miami. Yet it's not drugs or even terrorism that's most likely to get our shirts stuck in customs. "The only thing I can think of is a trade violation," Sacco says. "Trade is a huge issue."
Protecting U.S. trade means following an incredibly elaborate set of rules spelled out in a giant book that's more than 3,000 pages long. Michael Cone, a customs and international trade attorney in New York, calls it "the book of everything." Its official name is the Harmonized Tariff Schedule of the United States.
The book lists the tax that importers have to pay on approximately every single thing in the universe -- including, of course, T-shirts. They're right there under heading 6109: T-shirts, singlets, tank tops and similar garments, knitted or crocheted.
The average tax rate on stuff coming into the U.S. is around 2 percent. The tax on T-shirts is much higher: 16.5 percent. That's what we'll be paying on the Planet Money men's shirts, which were made in Bangladesh. But the Planet Money women's shirts were made in Colombia -- and those, according to the book of everything, come in duty-free, with no tariff at all.
So why are we paying a 16.5 percent tax on our shirts coming from Bangladesh, and zero on our shirts from Colombia?
Start with this: The United States has had a tax on textile imports since 1789 -- the year the Constitution took effect. Douglas Irwin, an economist at Dartmouth, says the tariff really got going after the War of 1812.
"Imports began flooding into the United States, hurting all of these small new producers of textiles," he says. "They clamored and went to Washington and said, 'Our industry is going to be wiped out; we're going to throw out of work thousands of people. We need protection to save our mills.' "
Congress raised the tariff, making textiles more expensive and protecting U.S. mills. The U.S. has had a tariff on textiles ever since.
But recently, another side of the tariff debate has gotten louder and more powerful: the companies that import clothes into the U.S., and the retail stores that sell those clothes. They point out that the tariff is passed on to consumers in the form of higher prices. Most economists say tariffs distort the economy and make it less efficient.
In the past few decades, the tariff on textiles and apparel has started to go away one country at a time. Mexico, Honduras, Israel and several other countries have all signed free-trade deals with the U.S. And, a few years ago, the U.S. made a free-trade deal with Colombia.
The CEO of the Colombian company that made our T-shirts says that if there were a tariff on Colombian shirts, his company couldn't export to the U.S. In other words, without the free-trade deal, the Planet Money women's T-shirts that were arriving in Miami wouldn't have been made in Colombia. This is how a tiny tweak in U.S. tariff rules -- in the book of everything -- can create or destroy whole industries in other countries.
Back at the port, I head over to the shipping company office, to find out one last thing: Have our shirts been released by customs? Or is customs going to hold us up while it makes sure we followed all of the trade rules?
To me, this is a big moment. It's the first time I've ever cleared 6,078 T-shirts through customs. To the woman helping me, it's the most routine thing in the world. She taps on her keyboard and gives me the news: "Everything is fully released."
In other words, customs cleared all 6,078 Planet Money women's T-shirts to enter the country, no tariff required.
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