Lou's Blues

A few days ago on CNN, Lou Dobbs worried that "the U.S. army may begin buying bullets from Israel and Canada because the U.S. ammunition plants can't keep up with demand."

Republican congressman Duncan Hunter, who is Chairman of the House Armed Services Committee, had this to say:

We shouldn't have any foreign dependents with respect to critical assets, and ammunition certainly falls into that category.

Unfortunately, Hunter and Dobbs forgot to tell us which assets are critical and which are not. Is food critical? How about clothing? Pharmaceuticals? Surely these are as vital to the general welfare as ammunition. Which products and services are too critical for the U.S. to depend upon foreign suppliers? Hunter and Dobbs do not say.

It's interesting that Dobbs' focus is on the arms industry. The U.S. is the world's largest producer of military weaponry, responsible for more than half of worldwide arms production. According to the Foreign Trade Division of the U.S. Census, the U.S. exports more than 3½ times as much advanced weaponry as it imports.

Imagine what would happen if the rest of the world did what Hunter and Dobbs want the U.S. to do. If the U.S. "shouldn't have any foreign dependents with respect to critical assets", then the same must be true for Israel, Canada, and every other country that imports weapons from the U.S. Instead of importing millions of dollars worth of weaponry each year from the U.S., Israel and Canada should become independent and produce all of their own weapons. This, of course, would put thousands of U.S. workers out of their jobs, and would cost the U.S. economy more than $3.50 in lost export sales for every dollar we might save by not purchasing from foreign sources, but that is the price we must pay for Lou's protectionism.

[cross-posted at The Agitator]

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This is merely the 'national

This is merely the 'national defense' argument for protectionism; whether or not an asset is 'critical' depends upon whether we need it to fight a war.

The argument goes, if in the absence of tariffs we end up buying bullets from Bulletania, a nation with a comparative advantage in bullets, that's all fine and good - until Bulletania decides to declare war on us for no good reason. At which point all our domestic bullet factories will have closed or converted, and so we won't be able to produce bullets, until we build those factories from the ground up. In the interim the damages resulting from our having to fight a war without bullets outweighs whatever wealth we can acquire via international arms trade.

Japan had a problem like that in WW2 - much of their war machine's material had been bought from the US, and near the end of their war with us it started to run out, and they couldn't buy more, nor could they produce it themselves.

I'm sure there's plenty of holes in the national defense argument, but that we'd lose money if other countries retaliated with the same trade policy isn't really one of them. It rests on the assertion that losing a war costs incalculably more value - in lives and in wealth - than can be made via international trade in a few commodities. Saying that national defense protectionism costs extra money because of other nations' retaliation doesn't really sway it.

Jon, The best argument


The best argument against national defense justifications for protectionism is the one I already mentioned: it is entirely arbitrary. A nation needs food, clothing, pharmaceuticals, and countless other products to fight a war. The national defense argument can be used to justify protections on nearly every product, and historically, it has succeeded in doing just that. The U.S. watch industry successfully obtained protection using this argument, as did the garlic and clothespin industries.

Is Lou really worried that we may one day go to war with Canada or Israel? Or does he just want to protect some American jobs at the expense of many more American jobs? My money is on the latter explanation.

Fair enough. I was

Fair enough. I was perceiving a lot more focus on the latter two paragraphs than there actually was, apparently.

A free market would likely counter that scenario anyway; countries rarely move from complete pacifism to complete war immediately, and in the intervening time, an enterprising individual might decide that they're willing to gamble on Bulletania declaring war on the United States, and buy up a large store of cheap bullets to sell at a profit in that event.

Of course, in our mixed economy, such an entrepreneur would be castigated as a hoarder or speculator, or somehow implicated as the cause of the war itself (since he profited from it). Just as in our mixed economy, politicians with too much power believe silly arguments that if honest are based on the fear that Canada might someday refuse to sell us bullets.

A round of ammunition has

A round of ammunition has four parts: powder, primer, case, and bullet. Powder is mostly nitrocellulose, which we have no problem producing domestically (indeed, Alliant is one of the big boys in that industry). Bullets are lead, copper, and sometimes steel. Cases are brass (copper+zinc). Primers are mostly brass and lead styphnate.

My question is, is the US self-sufficient in the production of those base metals? I mean, so what if Alliant could produce all the finished ammo we need if the raw materials are in turn imported?

Of course it's no surprise that politicians haven't thought this through... when do they ever?

The argument goes, if in the

The argument goes, if in the absence of tariffs we end up buying bullets from Bulletania, a nation with a comparative advantage in bullets, that?s all fine and good - until Bulletania decides to declare war on us for no good reason.

As with anything else, diversifying is always a good idea.

There are less protectionist

There are less protectionist measures that can be used. Take the example of oil. The US isn't self-sufficient in oil, and hasn't been for a long time. Oil is definately a key war supply. The current solution is a national oil stockpile, which also lets the government intervene in oil commodity prices--which looks like a good thing to the government. I would much prefer a bullet stockpile to a Farm Bill for bullet makers, because it maintains at least a pretense of market forces. We can buy the stockpile from Bulletania, selling our mickey mice on the world market to cover the expense.

Adding to the idea of a

Adding to the idea of a bullet stockpile, the subsequent question is how big a stockpile to make? I would suggest that you would need one that is big enough for you to tide you over until your civilian ammunition sector can switch over to military ammunition. Ideally, you would simply run the numbers and figure out how much extra multipurpose ammunition production lines would cost and incentivize civilian ammo makers to switch to such machines. If the deer hunters have trouble in the first year of a major war getting ammunition I won't cry too much.

An alternative would be to encourage civilian and military ammunition to come in the same package. We go through an awful lot of ammo as a matter of course in the US. There are better solutions than just building usually useless military ammo plants.

Some cheap ammo has aluminum

Some cheap ammo has aluminum cases rather than brass. Some hunting grounds mandate steel projectiles rather than lead. I imagine there is further scope for substitution if lead or copper should become scarce.