Anti-Competitive and Protectionist Country-of-Origin Bans Harm American Economy
When the government bans products from a list of nations or imposes high tariffs to accomplish the same goal, the result is a harmed American economy and limited consumer choices. These so-called country-of-origin bans are protectionism, plain and simple. If one believes in a free market and competition, anti-competitive behavior imposed by a country-of-origin ban runs counter to that and will lead to cronyism and higher prices for consumers.
These ideas are not new, and they have proven to be devastating to the economy of the government imposing protectionism. As Brian Garst wrote at RealClearPolicy on February 7, 2023, proponents of country-of-origin bans “usually cite nebulous national security concerns which largely go unchallenged. However, politicians should look skeptically at country of origin bans and other trade restrictions, as nationalism is often exploited by domestic competitors who produce expensive or inferior products.” Garst is correct.
One unintended consequence of banning products from an adversary is that it decouples the two economies in a way that hurts national security. Ironically, to protect national security by banning products made abroad, a government may be making war more likely because, with diminishing economic ties between nations, the consequences of a military conflict become less and less severe. In addition, the current trade war with China has resulted in two losers: both the United States and China. This is because when we ban certain products from China, China bans American products in a reciprocal way, harming companies from both nations. To protect small slivers of the economy from Chinese competition, American small businesses and jobs are lost.
There are several bills targeting foreign competition for a ban, covering a wide range of products. One example rolling out before our eyes is a protectionist bill titled the “American Security Drone Act of 2023.” That bill targets the market-leading drone company DJI, founded in Hong Kong, which has proven to be a favorite of first responders throughout the United States. The bill’s broad scope includes “any entity domiciled in the People’s Republic of China,” which covers DJI. This protectionism may help American drone manufacturers to get an edge on the competition but will end up hurting many local fire and police departments who have procured DJI drones to help find lost individuals or to map out a crime scene.
This legislation has minimal support and is not a top priority for either party; therefore, the proponents of the bill may try to hitch a ride to legislation being considered in Congress this month. The National Defense Authorization Act (NDAA) was a target for this bill in the past, and it may be an avenue for supporters to attempt to sneak the bill into law without much scrutiny once again. However, similar attempts in past years have failed because of the flaws with the American Security Drone Act, and hopefully, this protectionist policy will be rejected once again.
Supporters of this legislation will argue that national security is at risk if we don’t pass the bill. The opposite is true because these drones pose no national security or data security threat. Data security arguments have been a red herring to scare politicians into passing the bill. DJI users control the drones’ data, and all the first responders, police, fire, and security officials who use these drones have complete control over what data they share and do not share with the company. The drone company is not a social media app like TikTok that collects data to target advertisements, nor computer network components that trigger a national security study. Without any fact-based support, the reason for the legislation is protectionism for American drone manufacturers, plain and simple.
American drone makers should work harder to make a better product or work with the government to obtain support or incentives to help them catch up to products manufactured in China, but our government should not ban these drones favored by first responders, which would leave a vacuum that threatens public safety. Country-of-origin bans are bad for Americans and American companies doing business abroad. The result of these restrictions ends up harming national security and hurting the American economy, and they should not be pursued.
Peter Mihalick is former legislative director and counsel to former Reps. Barbara Comstock, Virginia Republican, and Rodney Blum, Iowa Republican.
