The cost of protectionism

Brazil is much poorer than they have to be. Just think of a country where they can't use computers used in the rest of the world.

On the night of Dec. 2, almost 500 gadget-crazy Brazilians in São Paulo lined up outside electronics retailer FNAC's big store in Morumbi Shopping complex south of the city. They waited until midnight to buy the Apple (AAPL) iPad, which finally went on sale in Brazil months after its international launch. First in line was Joao Teofilo Ribeiro, who was so excited he brought his entire family to wait with him.

They weren't looking for a bargain. The iPad lists at FNAC and other Brazilian stores for $985, almost twice as much as in the U.S. and one of the highest official prices for an iPad anywhere, according to Macworld Brazil, a Brazilian newsletter run by U.S.-based International Data Group.

The iPad is one example of the many price distortions caused by Brazil's elaborate industrial policy. Companies that don't manufacture goods in Brazil have to pay stiff tariffs if they want to sell to the nation's consumers. Brazil levies a 60 percent tax on the iPad and as much as 90 percent on imported cars. A blouse that retails for $49.50 at The Gap in the U.S. goes for $82 in Brazil at non-Gap outlets. "Brazilians sometimes pay luxury-good prices for second-rate items," says tax specialist André Mendes Moreira, who writes a widely read financial column and tracks the impact of import taxes on everything from cars to champagne. "The consumer is at a clear disadvantage." . . .

The US government is protecting its investment in Car companies

This is a big surprise. One would have hoped that the $100 billion already spent would have been enough. Or the $3 billion on the "cash for clunkers" program. Apparently there is more.

A spending bill passed by the U.S. House this summer explicitly forbids federal agencies from purchasing vehicles other than those made by GM, Chrysler and Ford Motor Co. A climate bill passed by the House appears to favor U.S. companies in doling out $2 billion in government funds to develop plug-in electric vehicles. Both measures still would need to be approved by the Senate.

And looming on the horizon is the Obama administration's pending release of new fuel-economy regulations. The rules will provide more details about President Barack Obama's earlier-announced plans to increase the average fuel economy of automobiles sold in the U.S. to 35.5 miles per gallon by 2016. Overseas car makers worry that in the details, the rules will be tilted toward GM, Chrysler and Ford.

The U.S. is majority owner of GM and has a small stake in Chrysler after having pushed both companies through speedy bankruptcy proceedings earlier this year.

"It is a threat," Stefan Jacoby, president of Volkswagen AG's U.S. business, said of the potential conflict of interest posed by the U.S. government's ownership stakes in GM and Chrysler. Mr. Jacoby said his company plans "to watch carefully" whether that "leads to discrimination against manufacturers who aren't getting support from the taxpayers." . . .

Smoot-Hawley tariffs worked so well in the 1930s, Democrats want to try them again now

Bloomberg has this news:

Congressional leaders, trying to quell a dispute over “Buy American” provisions in the stimulus package, are crafting a version that would apply only when they don’t violate trade rules, according to industry officials and a congressional aide. . . .

The House Ways and Means Committee’s Democratic staff and aides to Senate Majority Leader Harry Reid, a Nevada Democrat, are working out the language, said a lobbyist who was briefed on the measure. The people familiar with the talks declined to be identified because the talks are confidential. Ways and Means spokesman Matthew Beck didn’t have an immediate comment, and Reid spokesman Jim Manley didn’t return a telephone message.

Steel companies, such as U.S. Steel Corp. and Nucor Corp., and labor unions are pushing language in the stimulus plan to mandate that projects use American-made iron, steel and other manufactured goods in building projects such as roads, bridges and tunnels. . . .

“We’ve always said this doesn’t violate our trade laws,” said Robert Baugh, executive director of the Industrial Union Council at the AFL-CIO. “If they need to restate it, fine.”

Caterpillar, Microsoft

Some opponents of the Buy American plan, including Caterpillar Inc., Microsoft Corp. and the U.S. Chamber of Commerce, have said that even a version that doesn’t violate trade rules might spur protectionist measures around the world. . . .