The High Price of Protected Jobs by Hobart Rowen 01/13/1994 the Washington Post Page A27

It's no secret that tariffs and import restrictions cost consumers a lot of money. Anyone who buys a car in this country - domestic or imported - can assume that part of the price he pays the dealer represents the impact of "voluntary" quotas on Japanese cars that allowed both American and Nipponese companies to boost prices throughout the 1980s.

Protectionism, of course, hits consumers in other countries as well. In a recent report, GATT director Peter Sutherland estimated that fully one-third of the final cost of a car in France is attributable to oppressive French quotas on imports.

But the assumption, somehow, has been that if there are costs like these to be borne, at least the major beneficiaries are workers whose jobs have been preserved.

Wrong, according to some dramatic data gathered by Gary C. Hufbauer and Kimberley A. Elliott and published this week by the Institute for International Economics. In a new book, "Measuring the Costs of Protection in the United States," Hufbauer and Elliott calculate that in 1990, consumers had to pay about $70 billion in higher prices because of tariffs and quantitative restrictions.

Of that total, about $16 billion goes to the federal government in higher tariff revenues. That leaves a nest-egg of $54 billion, of which 80 percent, or $43 billion, goes to producers in 21 protected industries, who can boost their share of the market, and besides - with competition from abroad diminished - can raise prices.

The authors calculated that of the $43 billion bonanza for industry, not more than $4 billion, or 10 percent, goes to roughly 190,000 of their blue-collar workers, who retain their jobs as a result of the protectionist tariffs or quotas.

And here is where the simple arithmetic is mind-boggling: On the average, the cost to consumers for saving those jobs is an astounding $170,000 a year - or six times the average annual pay (wages plus benefits) of manufacturing workers.

That's merely the average: The annual cost of saving a job by protectionist strategies is more than $400,000 each in 10 of 21 long-protected industries.

Steel is a stunning example of what happened as protectionist pressures accelerated in the wake of recession here in 1990-91 and a global slump. Hufbauer and Elliott demonstrate that countervailing duties and anti-dumping penalties on foreign suppliers of steel since 1992 have saved the jobs of 1,239 steelworkers each at a cost to consumers of - are you ready for this? - $835,351.

The arithmetic of the steel case, if you want to check it, is this: Duties and penalties will reduce imports by about 30 percent and generate an average 4 percent rise in domestic prices. U.S. steel producers as a result benefit by about $657 million, while consumers expend an extra $1.035 billion for the steel products. The government's tariff gain is $318 million.

To date, the Clinton administration has resisted pressure from Detroit to reclassify minivans and sports utility vehicles (mostly Japanese) as light trucks, which pay a punitive 25 percent tariff, a hang-over from a 1960s trade dispute with Europe known as "the chicken war." Hufbauer and Elliott estimate that consumers would lose $987 million if Detroit should get its way, saving a minuscule 203 jobs. That would place the per-job cost to consumers at well over $4 million.

Detroit would still like to find a way, through trade protection, of choking off imports of Japanese minivans and utility vehicles. It would be nice to think that public attention to the Hufbauer-Elliott $4 million-per-job calculation will end this mischief for all time.

The good news to be gleaned from the picture painted by Hufbauer and Elliott is that the recently approved General Agreement on Tariffs and Trade will cut these horrendous charges on consumers all over the world. In this country, consumer costs for protectionism will be cut by $32 billion over time. The most heavily protected American industrial sectors, apparel and textiles, which now account for $24 billion of the $70 billion that consumers must fork over, will lose 70 percent of their protection.

One hopes that the Hufbauer-Elliott work will be closely studied, especially by those who opposed the North American Free Trade Agreement in the mistaken view that they were taking a pro-jobs position. Among other things, this new study demonstrates once again that protection seldom leads to renewed growth in a declining industry, and that jobs "saved" are not only saved at humongous cost but aren't very good jobs.

It's better economics, more compassionate and cheaper to pay extra-generous allowances to maintain the income, and to provide retraining and/or relocation costs for workers squeezed out of their jobs by competition and new technology.