Artificial Obstacles

When it comes to shipbuilding, the Republic of Korea has a system. Since they are on the tip of a peninsula and their only land-boarder is a dangerous no-man’s land, it seems only natural that they should turn to the sea for commerce. But they don’t just build ships, they build tons of them. In terms of gross tonnage, Korea produced 137,596,000 GT, some 37.45% of the world’s shipping capacity built in 2011. That is a lot of ship. Some are cruise liners and drill ships, but most are designed for transporting cargo and resources from one port to another. Naturally, most of the ships are sold to other countries, but some are used for transporting goods to and from Korea. It is these ships that form part of the topic here.

Korea builds ships designed specifically to engage in the trade of goods and resources with other countries. These ships are made bigger and faster to make it easier for goods and resources to reach their respective markets. The end result of making transportation easier is to make it cheaper and to reduce the market prices, encouraging commerce, etc.

While the shipbuilders at Ulsan are working diligently to make international trade easier and cheaper by overcoming the natural obstacles that impose themselves on shipping, the politicians in Seoul are working diligently to overcome the artificial obstacles that hinder international commerce and raise prices in the domestic market. Those artificial obstacles are tariffs, and Korea is finally getting rid of some.

Until recently, all imported beer has been subject to an absurd 30% tariff. Not only that, but since Korea does not grow the hops or barley needed to produce beer, the quality of domestic beer has been adversely affected by high tariffs. (That and a collection of regulations that have essentially granted a duopoly on beer production to two giant corporations that have no particular incentive to improve the quality of their products.)

But free trade agreements with the United States and the European Union have been signed and will remove many of the mutual trade barriers that have served primarily to enrich large companies at the expense of the consumers while simultaneously preventing quality beer from making headway in such a large market. Good times lie ahead for Korean (and American and European) consumers. That is to say, the societies as a whole.

But what about other beers from other parts of the world? Why should they still be subject to the tariffs? Some will argue that the FTAs are only good because they are bilateral. The USA takes down its tariffs, Korea takes down its tariffs, everything remains on equal footing. If Korea would remove tariffs on Australian goods without Australia removing its own tariffs on Korean goods, the obstacles of trade would be in only one direction and Korea would be “downstream” of Australia. It would be more expensive to ship goods to Australia than from Australia and that would be… bad? Korea would then be situated relative to Australia in the way that “Havre, Nantes, Bordeaux, Lisbon, London, Hamburg, and New Orleans are with relation to the towns situated at the sources of” the respective rivers on which they lie since it is cheaper for goods to travel down the river than up the river. And are the cities at the mouth of the river not more prosperous than the cities at the source?

Beer of the Week: Hacker-Pschorr Münchner Gold- This is a good example of the Munich Helles Lager. It is a light, clear gold, with a very white head. The aroma is mostly of bready malt. The flavor matches the smell, malty with only a hint of hops at the end. As the beer warms, a touch of alcohol warmth is easily detected in the finish. 5.5% isn’t that high, but it sure makes itself felt.

Reading of the week: Stulta and Puera by Frédéric Bastiat – In this amusing little apologue, Bastiat tells the story of two towns that went to great expense to build a highway to facilitate trade and then went to the further expense of placing obstacles on the road to make trade more difficult and expensive.

Question of the week: Have you ever wondered why high-fructose corn syrup is used instead of sugar (sucrose) in the United States? Did you know that since the early 1980’s, tariffs have made sugar twice as expensive in the United States as it is in the rest of the world?