On March 28, the House Oversight Committee held part one of hearings on the Food and Drug Administration (FDA) and its handling of the infant formula crisis. Former FDA Deputy Commissioner Frank Yiannas testified that the crisis could have been averted, or at the very least, the magnitude lessened. At Cato, we completely agree.

Unfortunately, Yiannas’ proposed solution was more of what got us into this mess in the first place: overregulation of the formula industry and overbearing FDA authority. Other policymakers argue for much the same.

Yet the infant formula industry’s weakness is not owed to a lack of regulation or FDA authority. In fact, as explained in a recent Cato briefing paper, overregulation of the U.S. infant formula market turned what should have been a temporary headache into a yearlong crisis. After Abbott Nutrition—the largest U.S. infant formula manufacturer—shut down its Michigan factory and nationally recalled its products, several different U.S. laws and regulations prevented other formula suppliers from plugging the hole punched in the U.S. market. Thus, this overregulation left retailers with few to no alternatives to Abbott’s brands, creating a massive supply shock that rippled throughout the country.

The federal government responded in multiple ways and the crisis waned in the fall of 2022. But, as the paper details, the successful responses did the opposite of increase regulation.

First, high tariffs and tariff-rate quotas on infant formula imports, along with onerous FDA rules for formula made abroad, effectively walled off the U.S. market from imports—even ones from large and reputable multinational producers located in highly-competent regulatory jurisdictions like Europe. As a result, a little over 98 percent of all formula consumed in the U.S. in 2021 was made here.

Recognizing this problem, Congress passed legislation last summer to suspend tariffs on most formula imports, and the FDA exercised “enforcement discretion” for a handful of new foreign producers (nine to be exact).

Sadly, this liberalization has mostly expired: on January 1, 2023, the tariffs went back into effect, and the FDA stopped accepting new foreign producer applications on January 6, 2023. (The nine approved companies can stay until October 2025 under this more lenient system.)

Secondly, onerous domestic regulations on formula—higher here than in most other countries and for most other foods—make it extremely costly for new manufacturers to enter the U.S. market. The only new market entrant since 2007, for example, spent more than five years and $190 million to navigate the regulatory process.

Finally, the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), which provides vouchers for low-income Americans to buy only a certain brand of formula (and at a steep discount) at approved retailers, has increased the market dominance of the three large U.S. producers that can meet WIC requirements. As such, when the crisis hit, the USDA temporarily allowed WIC beneficiaries to buy other formula brands, including imported formula. However, this reform expires in June at the latest, and only applies in store, not online.

Following these temporary reforms, the prolonged U.S. formula crisis—not experienced by any other country—began to ease and stock-rates improved. However, problems are now reemerging. As Chart 1 shows, imports rose after tariffs and FDA rules were liberalized, but have since fallen with the return of the prohibitive tariffs.

Now, retailers are warning again about empty store shelves, and consumers are complaining about price increases. Even more troubling, Yiannas warned the U.S. is extremely vulnerable to another major crisis, noting that disasters impacting the supply chain, like another bacterial outbreak or even a tornado, could rock the industry again.

In this regard, he’s unfortunately correct. But the solution isn’t more regulation; it’s deepening and making permanent the very trade, regulatory, and welfare reforms that tempered the crisis last year. Indeed, even the risk-averse FDA recognizes providing pathways for foreign producers to sell in the U.S. creates “more resiliency in the U.S. infant formula supply chain and [reduces] the risk of reliance on too few production facilities supporting the United States.” Yet high tariffs and other barriers remain in force.

If Congress fails to eliminate these barriers and enact other long-term, market-based reforms, America will continue to be uniquely vulnerable to another formula crisis, and one entirely of its own making.

…The Jones Act.

What a ride it’s been. Cato’s Protectionist Madness 2023 put 32 harmful U.S. trade policies in a classic, single‐​elimination tournament to let the public decide the worst of the bunch. After seven rounds of voting, 31 matchups, and almost 26,000 votes, we’ve crowned our very first ever Protectionist Madness champion.

It’s the Jones Act, and – as we’ve discussed for years here at Cato – it couldn’t be any more deserving of this “honor.” For those of you just tuning in, here’s how the tournament page summarized the law:

This 1920 law restricts the transportation of goods between domestic ports to vessels that are U.S.-built, U.S.-flagged, and mostly U.S.-owned and ‑crewed. Such ships are few in number (just 90 oceangoing cargo ships comply with the Jones Act) and significantly more expensive to build and crew than international ships. The results are high shipping rates within the United States, generation of more traffic and air pollution, and prevention of effective emergency response in places such as Puerto Rico. Repealing the Jones Act could increase U.S. economic output by up to $135 billion.

This blurb barely scratches the surface of the Jones Act’s many problems but was apparently sufficient to fuel a blowout (68.7%-31.3%) in the Championship match-up against a very worthy rival, Buy American. To read more about the Jones Act’s direct and indirect harms, head over to Cato’s Project on Jones Act Reform, or check out my new op-ed in The Atlantic looking at some of the law’s less-discussed collateral damage.

While we’re happy to see our work highlighting the Jones Act’s problems rewarded with this strong tournament showing, the Jones Act is unfortunately just one of the many U.S. laws that today restrict foreign trade and investment and in the process harm our economy, undermine our national security, and breed political dysfunction. Cato’s Protectionist Madness Tournament was a fun (we hope) way to highlight 32 of these policies, while underscoring just how much protectionism still exists in the supposedly “unfettered” U.S. economy. Here’s how it all went down:

If you missed any of this thrilling action – or are interested in some of the many other ways that American protectionism continues to harm the U.S. economy and burden our daily lives – you can head to the tournament page and click on any matchup to see the results and read about the policies at issue. And, of course, you can learn more about these and other policies at the Cato trade home page or sign up for our monthly newsletter to stay abreast of the latest developments. The tournament picked 32 bad U.S. policies, but unfortunately far more than that – on trade and many other policy issues – are still on the books or being proposed in Congress today.

On the bright side, those policies will be good fodder for another Madness tournament next year. So stay tuned, and thanks for playing.

In the wake of recent high-profile congressional hearings involving the CEO of TikTok, politicians and pundits are in a moral panic about the social media app and its Chinese owner, ByteDance. Instead of just focusing on TikTok or app-related privacy issues, however, some in Congress want to go further.

Much further.

In particular, a bipartisan group of senators, reportedly with the White House’s input and backing, are proposing to delegate expansive new “national security” powers to the executive branch so that it can investigate and restrict American citizens’ transactions that involve both certain foreign “adversary” nations, including but not limited to China, and a wide range of information and communications technology (ICT) products and services. As we’ll explain, the proposal—at least as currently written—raises troubling and far-reaching concerns for the First Amendment, international commerce, technology, privacy, and separation of powers.

What’s Actually in the RESTRICT Act?

The “Restricting the Emergence of Security Threats that Risk Information and Communications Technology” (RESTRICT Act) can be broken down into five main parts:

• ICT “transactions” authority. The bill authorizes and instructs the Department of Commerce to “identify, deter, disrupt, prevent, prohibit, investigate, or otherwise mitigate” any risk arising from a covered transaction between U.S. individuals/​firms and “covered entities” from “adversary countries” that “poses an undue or unacceptable risk to the national security of the United States or the safety of United States persons.” The bill broadly defines “transactions” to include “any acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology product or service, including ongoing activities such as managed services, data transmission, software updates, repairs, or the provision of data hosting services, or a class of such transactions.” These include risks of election interference, activities that “undermine democratic processes and institutions or steer policy” and anything that “otherwise poses an undue or unacceptable risk to national security.” Because almost any communications technology can be misused to meddle in foreign domestic affairs, any disfavored platform can be seen to present these risks. It also broadly defines a “covered entity” to include not merely state actors but essentially any group subject to the jurisdiction of a “foreign adversary” country or owned, directed or controlled by a person subject to that jurisdiction. The department may, but is not required to, publish an explanation for its determinations.

• “Holdings” authority. The bill also requires the secretary of commerce to identify covered “holdings” (defined as “any interest, stock, security, share, partnership interest, LLC interest, or any participation, right, or other equivalent, however designated and of any character”) that pose a risk to national security. Covered holdings are defined broadly to include any holding in which a group subject to the jurisdiction of a “foreign adversary” has direct or indirect “power… to determine, direct, or decide important matters affecting an entity.” Commerce must also refer such risks to the president who is then given 30 days to take “such action as the president considers appropriate to compel divestment of, or otherwise mitigate the risk associated with” such a holding.

• “Adversary countries” authority. The bill defines “adversary countries” to include China, Cuba, Iran, North Korea, Russia, and Venezuela, but also authorizes the Commerce Department to designate new “adversary countries” that have a “long-term pattern” or “serious instances of conduct significantly adverse to the national security of the United States or the security and safety of United States persons.” Commerce must notify Congress before making (or removing) this designation, and Congress can reject the agency’s decision by passing a joint (both chambers) resolution of disapproval.

• Investigation and enforcement authority. In carrying out its authorities, Commerce may “require any party to a transaction or holding under review or investigation… to furnish under oath, in the form of reports or otherwise, at any time as may be required by [Commerce], complete information relative to any act, transaction, or holding” covered by the law. Commerce or another agency may also “conduct investigations of violations of any authorization, order, mitigation measure, regulation, or prohibition issued” under the law. During these investigations, federal officials may search or seize covered imports; search or obtain books and records of “any person” implicated by the law; and/​or require those persons to appear and testify before the agency. Violations of the law (e.g., engaging in prohibited transactions or refusing to cooperate with an investigation) may be subject to both civil and criminal penalties, which include fines up to $1 million, imprisonment up to 20 years, and forfeiture of assets.

• Limited judicial review. The law expressly limits judicial review of agency and presidential determinations and actions under the Administrative Procedure Act and most other provisions of U.S. law. In particular, courts may disturb only actions taken by Commerce or the president that the plaintiff has demonstrated are “unconstitutional or in patent violation of a clear and mandatory statutory command.” During this litigation, the government may file sensitive, privileged, or classified information that will not be given to the party suing the government.

As of today, the bill has 25 co-sponsors: 13 Republicans, 11 Democrats, and 1 Independent.

First Amendment Concerns

As with many proposed TikTok bans, the RESTRICT Act would raise serious First Amendment concerns for TikTok’s American consumers. In some ways, the RESTRICT Act is even more concerning in this regard than a direct TikTok ban as it would likely impact far more apps than just TikTok. Its broad language could even limit consumers’ access to European telemedicine resources, certain popular technology hardware, and even using virtual private networks (VPNs).

The RESTRICT Act provides the executive branch with significant authority to restrict or ban apps associated with adversarial countries. In the case of TikTok, this will have a significant impact on users’ speech by way of government intervention. Given its impact on speech, the government would have to show that the action is narrowly tailored to national security concerns and does not burden speech more than necessary to address these concerns. The government is unlikely to succeed in this regard were the proposal to be challenged on First Amendment grounds.

In banning TikTok, the government is eliminating a forum used by millions of Americans to express themselves. Creators have used TikTok to entertain viewers, non-profits have highlighted their causes and work, and struggling small businesses have found new audiences that are interested in their products or services. Just as individuals choose to express themselves in different ways in an analog era, different social media platforms provide different opportunities for expression. So, while there are competing platforms like Instagram’s Reels and YouTube’s Shorts, removing users’ access to TikTok as their chosen platform would be like the government banning the New York Times and arguing it was not a First Amendment violation because the Washington Post exists.

During the Trump administration, there were previous attempts to ban TikTok and other apps with links to China. The RESTRICT App attempts to correct some of the procedural concerns related to these actions but it fails to resolve their First Amendment concerns.

Privacy

The RESTRICT Act also raises serious privacy concerns in relation to its potential reach, breadth, and penalties—not merely for entities and individuals located in “adversary” jurisdictions, but also American citizens. For example, the law authorizes the executive branch to “investigate” and “mitigate” “any risk” arising from “covered transactions” that would inevitably involve many U.S. persons—transactions that include not just the usual security-related ICT hardware items but also software (including updates) and “data transmission” (which could mean emails, direct messages, and so on).

And the executive branch may take such action any time it deems the transaction at issue to “pose[ ] an undue or unacceptable risk to the national security of the United States or the safety of United States persons.”

Given this language and the severe penalties for engaging in prohibited conduct, it’s no surprise that numerous technology and privacy experts—see, for example, here, here, and here—have expressed alarm over these provisions and their implications.

International Trade and Investment Implications

As currently drafted, the RESTRICT Act has enormous potential to expand the president’s already-significant ability to impose, without congressional input or oversight, new trade and investment restrictions on supposed national security grounds. In particular, the RESTRICT Act would likely allow Commerce to investigate and block a wide range of ICT goods, services, and investments involving—even indirectly—anyone in China or subject to Chinese laws (or the laws of another “adversary” nation). The “undue or unacceptable risk” justifying any such determinations and subsequent government actions would effectively be left to Commerce’s discretion and face very little scrutiny or pushback from Congress, the courts, or the public—especially since the agency is not even required to publish its findings. Thus, this law would represent an almost-blank check from Congress to the president to disrupt tech-related trade and investment involving “adversaries” (which, of course, Commerce can also expand to include other nations unless both chambers of Congress vote otherwise).

One needn’t simply imagine how this broad delegation of Congress’s constitutional authority over international commerce might be abused in the future. Recent history provides an easy guide.

In 2018, President Trump invoked Section 232 of the Trade Expansion Act of 1962 to impose “national security” tariffs on a wide range of steel and aluminum products—including items like rebar with no legitimate national security nexus—imported from virtually every country in the world, including longstanding allies. The law authorizes the executive branch to “adjust” any imports threatening national security, as found in a report from the Commerce Department.

The tariffs were imposed over the objection of the administration’s own defense secretary, who noted in a memorandum at the time, that “U.S. military requirements for steel and aluminum each only represent about three percent of U.S. production.” The requisite Commerce Department reports disregarded this input and instead recommended broad tariffs—coincidentally just what the president wanted—based on questionable, thinly sourced grounds.

Trump’s tariffs triggered predictable retaliation from trading partners—ensnaring unrelated industries into the back and forth—raised prices for U.S. consumers, while doing virtually nothing to bolster the domestic steel and aluminum industries. The uncertainty surrounding Trump’s exercise of these and other tariff powers also deterred U.S. investment, thus lowering economic growth.

Given these harms, numerous members of Congress expressed opposition to the tariffs, and numerous lawsuits were filed. However, even modest legislative reforms have been blocked by partisanship, politics, and gridlock, and U.S. courts have repeatedly deferred to the executive branch’s national security justifications. Offered the opportunity to turn the page on the tariffs, the Biden administration has instead defended them in court and in dispute settlement at the World Trade Organization (WTO). They remain in place today.

As currently drafted, the RESTRICT Act would double-down on Section 232’s problematic approach to U.S. trade and investment policy, but with even fewer checks on the executive branch’s actions. Commerce, for example, wouldn’t even have to write a report before new sanctions are imposed, and judicial review of any such actions is expressly curtailed. Such actions would not only harm the American consumers and companies directly involved in the transactions and investments at issue, but also impose broader economic harms by granting the executive branch carte blanche authority to meddle with international commerce. Uncertainty surrounding the exercise or potential abuse of this power would likely dampen investment, thus lowering productivity, jobs, and wages over the long term.

Despite the proven benefits of international trade and investment, American policymakers have increasingly justified politically motivated, economically illiterate protectionism on flimsy national security grounds. The RESTRICT Act would undoubtedly encourage more such behavior.

Conclusion

As currently drafted, the RESTRICT Act likely runs afoul of the First Amendment, erodes Americans’ privacy protections, and would open the door to not only more misguided protectionism, but also government investigations, fines, and even imprisonment of Americans who engage in common online activities deemed too “risky” by the executive branch alone. Regardless of whether the act becomes law, that it quickly garnered 25 Senate co-sponsors is a troubling indication that even the most egregiously bad legislation can attract a crowd these days if it’s sold as countering the “China threat.” And it shows that the risks to Americans’ wealth, safety, and security come not from China alone.

Heightened U.S.-China economic and geopolitical tensions have produced numerous congressional proposals to forcibly decouple the two economies, ostensibly on national security grounds. Several such proposals would severely restrict or even ban Chinese ownership of U.S. farmland, due to the aforementioned tensions and the fact that farmland purchases by Chinese nationals or companies have increased in recent years.

Surely, foreign governments’ or government-controlled entities’ purchases of certain U.S. land (e.g., near sensitive military installations) can raise legitimate national security concerns that might warrant federal oversight or intervention. Fortunately, there’s little current indication that foreign farmland purchases – even by Chinese entities – justify the type of broad-based government restrictions that some in Congress are contemplating.

For starters, recent increases in foreign and Chinese ownership need to be put into proper perspective. While the amount of U.S. agricultural land owned by foreigners doubled between 2009–2019, the latest federal government data (for 2021) show that these parcels still account for just 3.1 percent of all private farmland in the United States (see Figure 1). The United States Department of Agriculture (USDA) defines foreign ownership as both land owned solely by foreigners, as well as land jointly owned by American and foreign investors.

Of this sliver of private U.S. agricultural land, moreover, Chinese entities remain a tiny player. As Figure 2 shows, in fact, Chinese entities own less than 1 percent of all foreign-owned farmland, while most of the land is owned by companies and individuals located in nations closely allied with the United States, such as Canada (30 percent), the Netherlands (12 percent), Italy (6 percent), the U.K. (6 percent), and Germany (6 percent). Including Hong Kong in China’s totals doesn’t much change these results – it’s still just 1.2 percent of all foreign-owned farmland. As Tori Smith of the American Action Forum notes, China ranks tenth among foreign nations in the value of their U.S. farmland, behind Japan and Sweden, and well behind Canada, the Netherlands, and Germany.

Overall, these totals mean that China or China and Hong Kong combined accounted for a trivial 0.03 or 0.04 percent, respectively, of all private U.S. agricultural land in 2021 (see Figure 3). To put that into perspective: If all private U.S. agricultural land were a gallon of milk, Chinese holdings would fill a whopping… quarter of a teaspoon.

This does not scream “national security crisis.”

Furthermore, there are several reasons why even these paltry totals likely overstate the threat posed by Chinese ownership of U.S. farmland. First, as Cato adjunct scholar Dan Griswold points out in a forthcoming op-ed, most of the “Chinese” land at issue is “other agricultural” land, not actual cropland or forest, and most of this “other” land is owned by a Hong Kong-based private company following the 2013 acquisition of U.S. pork producer Smithfield. While controversial at the time, the acquisition was reviewed and approved by the U.S. government’s inbound investment-screening body, the Committee on Foreign Investment in the United States (CFIUS), and has raised no serious land-related concerns in the last decade.

Second, it’s not entirely clear why Chinese holdings of U.S. farmland are, in general, problematic. Most obviously, the Chinese government cannot steal the land, and the U.S. government could (and probably would) expropriate it in times of war or other national emergencies. Furthermore, absent an exponential (and wholly unrealistic) increase in Chinese land holdings, there would remain hundreds of millions of acres of U.S. land – farmland or otherwise – not under Chinese control. This includes 640 million acres of land owned by the federal government, millions of which are already used by American ranchers for cattle grazing. Indeed, thanks to scientific and technological innovations that have tripled agricultural productivity (meaning we produce much more food on the same amount of land) since 1948, Americans’ own farmland needs continue to decline.

All this being said, specific foreign land holdings could raise national security concerns, and there is some possible room for improvement in this regard. In particular, data on foreign-owned farmland near high-security sites, such as military installations, could be improved. As the Center for Strategic and International Studies noted in 2021, for example, the only federal law regarding data on foreign agricultural holdings is the Agricultural Foreign Investment Disclosure Act (AFIDA), which relies on self-reported data from foreign entities. Additionally, AFIDA-reported data is not checked by USDA for accuracy, and the agency rarely penalizes companies for failing to report data. Others have reported on similar shortcomings with the current farmland data.

Also, U.S. investment screening rules could be updated to ensure that CFIUS can review foreign farmland purchases near military installations. For example, Chinese agriculture company Fufeng recently purchased land 15 miles from Grand Forks Air Force Base, even though the Air Force wrote that it viewed the acquisition as a national security threat. CFIUS, however, concluded it didn’t have jurisdiction over the purchase. (Ultimately, the Grand Forks, N.D. city government stopped the corn mill proposed at the site, although Fufeng still owns the land.)

Given these two issues, it may be appropriate for Congress to improve government data on foreign-owned farmland and to ensure that real national security issues can be remedied. Some legislation, such as the FARM Act, the Protecting Military Installations and Ranges Act, and the SOIL Act, have proposed reforms in this regard, though each could be improved in certain other respects. Given the legal, economic, and practical concerns raised by the federal government broadly restricting private land transactions (ones usually involving American citizens), such actions shouldn’t be considered until more narrowly-targeted measures are implemented, data enhancements and other improvements are made, and additional problems are revealed. In the meantime, however, there’s little reason for serious concern about the vast majority of foreign farmland holdings, including the quarter-teaspoon held by China.

This week the Biden administration kicked off its “Invest in America” tour aimed at highlighting White House-backed initiatives such as the CHIPS and Science Act and Bipartisan Infrastructure Law. While meant to showcase the White House’s legislative achievements, the public relations blitz serves as a reminder of how the administration’s stated goals are being undermined by protectionist measures that it supports. Here’s a closer look at some of those visits and the protectionist lessons that can be learned from each.

President Biden’s visit to a North Carolina-based semiconductor manufacturer. In his visit to semiconductor manufacturer Wolfspeed on Tuesday President Biden spotlighted the company’s construction of a new manufacturing facility, which the president credited to his economic agenda. Biden’s time might have been better spent, however, learning about the company’s perspective on the ongoing trade war with China. As Wolfspeed notes in its most recent quarterly report, a key risk currently facing the company is the “economic and political uncertainty caused by the tariffs imposed by the United States on Chinese goods, and corresponding Chinese tariffs and currency devaluation in response.” Such uncertainties and possible retaliatory moves, the company added, could negatively impact demand for Wolfspeed’s products.

It remains unclear exactly what punitive U.S. tariffs on Chinese goods are accomplishing, but Wolfspeed is yet another example of the threats they pose to U.S. firms’ ability to compete in the global marketplace.

Mitch Landrieu’s stop in Nashville, Tennessee. Landrieu, a White House advisor tasked with coordinating the implementation of the Bipartisan Infrastructure Law, will visit the Volunteer State to explain how administration-backed legislation is “creating safer, smarter transportation and expanding electric vehicle charging manufacturing.” Unmentioned by the White House is that protectionist Buy America requirements—championed by President Biden—that electric vehicle chargers be domestically produced are slowing the deployment of charging stations. As a Reuters story from last week points out:

Requirements to immediately start assembling the chargers at U.S. factories and to use U.S.-made iron or steel enclosures have caught many in the EV charging industry off guard, according to company executives and industry experts.

…Companies and some state officials who will manage the federal funds are warning that the country currently lacks the domestic production capacity—particularly on high-speed chargers—and that strict enforcement will slow the rollout, drive up costs and possibly hurt the industry Biden seeks to nurture.

“Everyone was hoping that there would be a waiver on the Buy America and Made in America,” said Aatish Patel, co-founder of XCharge North America, which imports chargers from its manufacturing plant in Beijing. “That throws a wrench in a lot of people’s plans.”

If the administration wants to encourage the development of a charging network for electric vehicles—something it claims to support—its stance on these protectionist requirements should be urgently rethought.

Secretary of Commerce Gina Raimondo’s visit to North Carolina. Traveling with President Biden this week, Secretary Raimondo was slated to visit fiber optic cable manufacturers and used her trip to highlight the inability of some citizens to access broadband internet. One prominent obstacle to broadband’s expansion, however, is protectionist restrictions supported by President Biden. As a new Bloomberg report notes, many of the key components that make broadband internet function are imported and thus run afoul of measures mandating the use of American equipment.

Cable providers, chip makers and wireless carriers are pleading for relief from the requirement to “buy American,” saying they can’t build new networks without foreign electronics. Otherwise the broadband buildup that Biden has set as a priority will be delayed by years as domestic sources are developed.

…Companies need to be assured they will get permission to buy foreign electronics before they’ll break ground to lay new broadband lines, said Dave Stehlin, chief executive officer of the Telecommunications Industry Association. Members of the trade group include chipmakers Cisco Systems Inc. and Qualcomm Inc., Nokia Oyj and Ericsson AB.

“A waiver has to be in place by then,” Stehlin said in an interview. “No service provider is going to dig a hole, lay a fiber cable, and hope and pray as they wait for the electronics. They’re going to wait until they have everything lined up. So the longer we wait, the longer it is before these unserved and underserved people actually have broadband.”

As with the deployment of infrastructure to support electric vehicles, administration-backed protectionism is very much at odds with its stated goals.

Secretary of Energy Jennifer Granholm’s trip to Puerto Rico. Arriving in the U.S. territory earlier this week, Secretary Granholm will use her visit to—among other items—emphasize administration-backed efforts to modernize Puerto Rico’s electrical grid, provide reliable power, and strengthen its resilience during severe weather events. However, the advancement of these goals (as well as Puerto Rico’s general prosperity) is directly at odds with President Biden’s support of the Jones Act.

Passed in 1920, the Jones Act restricts waterborne transportation within the United States—including the U.S. mainland and Puerto Rico—to vessels that are U.S.-flagged, U.S.-built and mostly U.S. crewed and owned. At best, such vessels are considerably more expensive than those under foreign flags. But in some cases they aren’t available at any price—they simply don’t exist. Of the world’s more than 600 tankers capable of transporting liquefied natural gas (LNG), none comply with the 1920 law. As a result, U.S. LNG is exported to dozens of other countries but cannot be transported to Puerto Rico. Instead, the island must turn to foreign sources including distant Nigeria, Oman, and Brazil (itself the 9th-largest consumer of U.S. LNG since 2016) rather than much closer U.S. LNG export terminals.

Last year Puerto Rico even imported LNG that originated in Russia (not for the first time either).

That’s not just a geopolitical embarrassment but economically nonsensical, particularly given that the neighboring Dominican Republic—unconstrained by the Jones Act—chooses to purchase most of its LNG from the U.S. mainland. All of this means wasted money that could instead be used to shore up Puerto Rico’s electrical grid (among other possible productive uses).

Jones Act prohibitions also harm Puerto Rico’s energy reliability. In fact, last October a Jones Act waiver had to be issued to ensure sufficient supplies at one of the island’s power plants. The law also interrupted the flow of diesel fuel to the island in the wake of Hurricane Fiona. Any efforts to improve the island’s ability to withstand and recover from such severe weather events should place Jones Act reform as a logical starting point.

Summing up: On issue after issue, the Biden administration’s support for protectionist policies comes in direct conflict with stated policy priorities ranging from improved infrastructure to expanded broadband access to bolstering Puerto Rico’s energy reliability. Unfortunately, it’s a tension that the Biden administration has yet to acknowledge, much less grapple with. Until that happens, expect protectionism-induced dysfunction and inefficiency to continue undermining the goals of White House initiatives.

Cato’s Protectionist Madness 2023 started two weeks ago with 32 terrible U.S. trade policies going head‐​to‐​head in a single‐​elimination tournament that’ll let the public decide the worst of the bunch. After four rounds of voting, an “overtime” thriller, and more than 21,000 votes cast, just eight policies now remain (seeding in parentheses).

• Section 232 (Metals Tariffs) (1)
• Trans-Pacific Partnership Withdrawal (2)
• The Jones Act (1)
• Sugar Quotas (2)
• Antidumping and Countervailing Duty Law (1)
• The Foreign Dredge Act (2)
• Buy American (1)
• Section 301 (2)

As the seeds above indicate, the Tournament Section Committee (aka Cato trade policy scholars) did a good job predicting what U.S. trade policies would attract the most public ire, though 4th-seeded Textile/​Apparel tariffs pushed the Foreign Dredge Act into overtime after an incredibly-unlikely Round 4 tie. Several other surprises happened along the way: electric vehicle localization requirements rolled over the WTO Appellate Body blockade; solar panel duties shocked shoe tariffs; and softwood lumber duties felled the Passenger Vehicle Services Act. In the end, however, the giants of American protectionism won out (while the rest of the country loses). Now they’ll face off today/​tomorrow (Egregious 8) and Wednesday/​Thursday (Foul 4) for a trip to next week’s Championship:

I personally have the 232s winning it all, as they’re a perfect storm of bad trade policy: bad economics, bad law, bad foreign policy, and bad politics. But several of my Cato colleagues and thousands of other voters disagree.

What do you think? Be sure to vote here.

It’s my goal with this series to plug trade into your mind using stories about relatable products. Here in DC, the cherry blossoms are in full bloom, and since the beginning of last week marked spring, flowers seemed an apt topic.

Much of my work focuses on protectionist trade policies, but the story behind flowers is much cheerier. Flowers received extensive trade liberalization, primarily through the U.S.-Colombia free trade agreement, which entered into force in 2012. Colombia has been the U.S.‘s top trading partner for flowers since at least 1989, but before the agreement, Colombian flower imports were subject to high U.S. tariffs. The agreement removed tariffs on flowers and cut flower trade boomed. Between 2012 and 2022, U.S. flower imports almost doubled, as shown in the chart. However, the U.S. also liberalized flower trade with other countries, and out of the top 10 trading partners for cut flowers in 2022, the U.S. has free trade agreements with seven. As a result, overall flower imports increased from around $968 million in 2012 to almost $2 billion in 2022.

While trade liberalization with Colombia made flower imports cheaper, tariff reduction is not the only reason flowers are more affordable. Colombia has a comparative advantage in flower production. This means that Colombia can produce flowers more efficiently than the United States. As a result, it produces flowers more cost effectively, which translates into savings for Americans. For example, until the 1980s, the majority of roses sold in the U.S. were grown in California and a dozen roses cost around $150. Today, most roses are imported (57 percent and 40 percent came from Colombia and Ecuador, respectively in 2022) and you can buy a dozen for as little as $8.99. (Although, it’s not all sunshine and roses (ha) because the U.S. does not have a free trade agreement with Ecuador, and so Ecuadorian roses are subject to a 6.8 percent tariff per stem.)

As you shop for flowers to brighten your home or send a bouquet as a gift, remember that free floral trade provides you with more options at different prices.