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Report Says Tariffs Cost American Consumers $19 a Year With PM-Trade Barriers

November 27, 1993

WASHINGTON (AP) _ Americans spend $19 billion more a year on everything from ball bearings and machine tools to dresses and costume jewelry because of protective trade tariffs, according to a government study.

The U.S. International Trade Commission estimated that high tariffs and quotas pushed up average prices in 44 sectors by 3 percent.

Officials at the agency, which rules on unfair trading complaints lodged by U.S. industry against foreign competitors, said Friday they were releasing the report to underscore the benefits to the American economy from a successful conclusion of the Uruguay Round of global free trade talks.

Those talks, which have dragged on for seven years, are facing a Dec. 15 deadline with negotiators still far apart on several issues. The discussions, involving 115 nations, are being conducted by the General Agreement on Tariffs and Trade, the world body that governs trade.

While economists say that global output could receive a boost of $270 billion by lowering tariffs and expanding trade, protected industries in the United States and around the world are fighting fiercely to hold onto their trade barriers as a way of keeping jobs.

According to the ITC report, 44 sectors of the American economy receive significant protection from imports. The biggest impact was found in the apparel and textile sector, where trade barriers add $15.85 billion to prices consumers must pay.

The ITC estimated that the average price for apparel products would drop by 11.4 percent if the trade barriers were removed, the largest price decline for any of the sectors studied.

After clothing, some of the biggest price drops were in luggage, a decrease of 9.1 percent, and sugar, a drop of 8 percent.

The ITC report conceded that jobs would be lost from the removal of trade barriers. It estimated that the apparel industry alone would lose 46,724 jobs, representing 6 percent of U.S. employment in that industry. Counting all sectors of textile and apparel, it put the potential job loss at 71,369.

The ITC report concluded, however, that there would be no adverse impact on overall employment in the United States. It said jobs lost in protected industries would be offset by gains in other sectors because of higher consumer spending that would result from lower prices.

The ITC report found that after apparel and textiles, the biggest price drop, $3.09 billion, would come from removing restrictions that prohibit foreign ships from carrying domestic cargo between U.S. ports. The change would result in a loss of 11,905 jobs in ocean shipping, but the ITC said that would be more than offset by gains in related industries as dock workers benefited from increased volume of shipping by foreign carriers.

After textiles and apparel and ocean shipping, the ITC found the biggest price impacts in agriculture, including $847 million annually in higher dairy prices because of trade barriers; $657 million in higher sugar prices; $353 million in peanuts; and $177 million in meat.

Other areas where prices were higher because of trade protection included footwear, watches, ball and roller bearings, pressed and blown glass, costume jewelry, machine tools, frozen fruit and vegetables, ceramic wall and floor tiles and leather goods.

The impact of higher prices for consumers in these categories ranged from $170 million for footwear down to $2 million each for leather gloves and china tableware.

Taken together, the total price impact on a sector-by-sector basis was $21.46 billion. However, the ITC estimated an overall impact of $18.98 billion because its economy-wide model took account of offsetting factors.

The ITC report did not present estimates for trade restrictions in autos, steel and cotton because it judged those not to have had an economic impact in 1991, the year used for the analysis, because imports were below established quotas.