A Modest Member of Parliament [Bert Kelly], The Australian Financial Review, July 16, 1976, p. 4. Reprinted in Economics Made Easy (Adelaide: Brolga Books, 1982), pp. 42-44, as “Tariffs paid by Exporters (1).”

Eccles has been in one of his mean moods lately. He complains that I haven’t been doing him justice in the way I present his argument that the burden of tariff protection is carried by exporters. He growls:

It’s just not good enough to say glibly that all economists know that this is the case.

That’s true enough, all economists indeed recognise that there is no such thing as a free feed and that someone has to pay the price of tariffs and the person who does the paying is the exporter.

But it’s not enough just to say this, you have to explain to people like Fred and Mavis, and in words of one syllable.

You must go over it again so that he who runs may read.

So here we go again.

Even Fred can see that he pays the cost for tariffs imposed on things he buys, such as weedicides and agricultural machinery, because the tariff on these goods is put on solely to make the imported goods dearer so that Australian goods can be sold at a higher price.

So Fred doesn’t have to be an economic genius to see that he pays the price for tariffs on the materials he uses.

But it is harder for Fred to see that the cost of the tariff on all the things he doesn’t buy is paid by him also.

Even the tariff on brassieres is paid by Fred and his fellow exporters, though Fred is certainly not the kind of fellow who wears brassieres.

A tariff on brassieres gets built into the cost of living because clothing is a cost-of-living item.

So brassieres get dearer as the tariff on brassieres is increased and so the cost of living rises a little.

And the tariff on sheets, on cars, on paint, on anything at all, gets built into the cost of living and so increases Fred’s costs directly, because everything he buys is made dearer.

Tariffs make everything that everyone else buys dearer also but these other people can recover the increased cost by passing them on to the man next down the line.

For instance, if brassieres become dearer and the CPI goes up, wages automatically increase to compensate, so the wage earner doesn’t pay for the increased tariff.

Nor does the plumber who is working for himself, because he and all the other plumbers will be able to put their charges up too because their costs too have been increased.

So up goes the price of plumbing, retailing, medical services, and all the other goods and services, they all rise until they reach Fred, the exporter.

His costs rise too, but the merchant in Europe who buys Fred’s wheat, wool or meat isn’t moved when Fred complains that his costs have risen. You can hear him say:

How very sad, Fred.

But I can get my wheat for less in Canada so why should I pay you more?

So Fred and all other exporters pay the price for tariff protection for other industries.

They don’t do this because they are noble or nice, or because they are prepared to sacrifice themselves on the Australian economic altar or anything like that.

The poor sods pay because they have to, because the company making brassieres, or something else, has kidded the government that there is such a thing as a free feed.

But Eccles says there is another side to the tariff burden, there is another price the exporter pays.

Eccles says that every action that prevents imports of goods and services coming in, by imposing tariffs or import quotas, has an automatic influence in discouraging exports.

It does this by placing greater pressure on the exchange rate, tending to move it in such a way as to discourage exports.

If the government makes importing harder, it makes exporting harder also,” is Eccles’ mournful cry.

Now it is important that Fred doesn’t get to know what is happening to him — that he doesn’t find out that he is paying for the free feed for which the brassiere maker or other people are asking.

Fred and other exporters have been feeling the burden of increasing costs to be an almost impossible load lately.

Now even the increased weight of another brassiere would just about break Fred’s back, if that’s where he would carry it.

So if one day you find Fred burning brassieres it won’t be because he is liberated, it is because he is sick of the burden he bears.