Retailers "Scream" Discrimination

This little story from 2002 illustrates the harms of trade restrictions:

For years, retailers from Wal-Mart and Target to tiny fancy-goods outlets have counted on low-cost imports from China to scare up sales at Halloween. A cheap polyester ghoul robe, along with a "Scream" mask retails for less than $20.  Classed as "flimsy festive articles," party-goods suppliers imported them duty free -- until U.S. Halloween giant, Rubie's Costume Company, got them reclassified as "fancy dress apparel."
This ruling puts ghoul robes in the same tariffs-and-quotas basket as classy theatrical robes, evening gowns, and even wedding tuxedos.  Hit with a whopping 32 percent in duties that could double the price of Halloween costumes at retail, importers are effectively squeezed out of the Halloween market.  Worse still, the difficulty and expense involved with quota visas from China threatens to wipe out the estimated $250 million market for imported costumes.

New York-based Rubie's stands to gain from the reclassifcation.  Rubie's buys its Halloween goodies from Mexico rather than China -- and under NAFTA, imports from Mexico are exempt from the tariffs.  For Rubie's, which has been in the Halloween business for 50 years, it's payback time.  Before NAFTA, the company, which manufactures in North America, struggled to match its prices with floods of cheap imports.

As you can see the various loopholes in trade laws can be manipulated to benefit companies even if they may not be the most efficient producer.  The same effect is seen in almost any industry and can induce tariff wars and protectionist counter-measures.  A seemingly harmless tariff law on wedding attire can turn into a drastic shift in the Halloween apparel industry.  Go figure.

Sources: Neil King Jr., "Costume Drama: Is a 'Scream' Robe Really as Fancy as a Tux?" WSJ, March 15, 2002; "Reciept of Domestic Interested Party Petition Concerning Tariff Classification of Textile Costumes," US Customs Service, http://www.american.edu