How To Get Bands For Your Bucks: A Lesson In Tariffs

Mar 8, 2018
Originally published on March 8, 2018 7:49 pm
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We've been talking a lot about President Trump's tariffs on steel and aluminum. But these aren't the only tariffs the U.S. levies on imports. Stacey Vanek Smith co-hosts our new podcast The Indicator From Planet Money. For some insight into the Trump administration's broader approach to global trade, she looked at a humble little product that you probably have in your house.

STACEY VANEK SMITH, BYLINE: Rubber bands are an international product. They're part of international trade. They're used across many industries - stationary obviously but other things too.

JASON RISNER: There's agricultural use. If you walk into a grocery store, and you see broccoli bundled together with a rubber band...

VANEK SMITH: Oh, the big, thick ones.

RISNER: Yeah, so those are typically our rubber bands as well.

VANEK SMITH: Jason Risner is with Alliance Rubber Company in Hot Springs, Ark. It owns about 40 percent of the U.S. rubber band market. And a few years ago, Jason's customers started calling him up and saying they were going to buy their rubber bands from somewhere else. And even Staples, one of their biggest clients, decided to go with an overseas competitor. Thailand, Sri Lanka and China, these are the big players in the rubber band market. And these overseas competitors were charging more than 60 percent less for their rubber bands. And this made Risner suspicious.

RISNER: This is not right - big red flag. They're actually being sold to the U.S. at what we allege is a dumped price.

VANEK SMITH: Dumped price - dumping, this is when one country will flood another country with something that is priced way below what it's worth. They take a loss on it. And the idea is that they drive local competition out of business, take over the market and eventually drive up the price. Dumping is illegal.

RISNER: You see a lot of these cases in aluminum and steel. And you don't see a lot in everyday office products. But we were aware of another case in the late '90s on paper clips. And we used it kind of as the benchmark.

VANEK SMITH: Office products have to stick together. In the '90s, U.S. paperclip makers accused China of dumping. And they won a 127 percent tariff on paperclips. That means that for the paperclips to come into the U.S. there is a 127 percent markup on them - to this day. So Alliance took its rubber band case to the International Trade Commission and the Commerce Department. And an official investigation was launched - one of many. Maria Panezi is a research fellow at the Centre for International Governance Innovation. She says the number of dumping investigations launched under the Trump administration is up 80 percent over the number of investigations under the Obama administration.

MARIA PANEZI: The Obama administration weighed the interests of the government vis-a-vis other countries a little bit more before starting...

VANEK SMITH: Kind of like, oh, wait. We're making a deal with China right now. Let's not...

PANEZI: Right. Let's not.

VANEK SMITH: Maria says Trump seems more focused on catering to domestic interests. And she says this is a tricky balance to strike. Governments need to protect their industries and their companies from dumping. But if the government does this too much, it can end up with a whole industry that doesn't innovate and just depends on the government for protection. That's not happening with rubber bands, according to Jason Risner. He says they just need a fair playing field for the dumping to stop.

RISNER: We could be doing so much better if we weren't up against this unfair competition. We could be employing 250 employees, you know, here in Arkansas.

VANEK SMITH: It'll probably take about a year for a decision to come down from the government on whether or not rubber bands actually are being dumped onto the U.S. market and whether Alliance will get the 60-plus percent tariff it wants. But Jason says he is optimistic. After all, the Trump administration has been favorable to companies like his. And there is the great paper clip precedent. Stacey Vanek Smith, NPR News.

KELLY: And Stacey is co-host of NPR's daily podcast about economics and ideas. It's called The Indicator From Planet Money.

(SOUNDBITE OF M. WARD'S "DUET FOR GUITARS, NO. 3") Transcript provided by NPR, Copyright NPR.