The Ant and the Grasshopper—Revised Version

If you’ve heard this story before, just bear with me. Once upon a time, there was an ant, and there was a grasshopper. The ant spent his summer gathering food for the winter, while the grasshopper spent the summer playing with his friends. The ant warned the grasshopper that he needed to prepare, but the grasshopper always answered that he would do that tomorrow. Winter arrived, and with it came cold weather. The ant was snug and warm in his nest when one day the grasshopper knocked on his door and asked to come in. He said, “Oh, ant, I’m cold and hungry. Can you help me?” The ant gave him a lecture about how he should have spent the summer preparing for this. The grasshopper said he was very sorry and would do better next year, but right now he was cold and starving and needed help. The ant thought for a moment and said, “Well, there is one thing I can think of.” The grasshopper said, “Grand, what is it?” The ant said, “You could become an ant.” The grasshopper said, “I never thought of that. How would I do it?” The ant responded, “I have no idea. That’s implementation. I’m in policy planning.” And that is the end of the story.

This story, sadly, is relevant to the government. The people, usually political appointees, tasked with coming up with new initiatives are rarely the people who subsequently have to figure out how to turn those ideas into administrative reality. They are also the ones who usually have to deal with the unexpected consequences that inevitably occur. The best trade example is the Liberation Day tariffs, which created implementation difficulties and a boatload—pun intended—of unanticipated consequences. There were problems at the beginning, such as the high tariffs imposed on an island populated only by penguins (which did lead to some very funny videos), and there were implementation errors in revising the tariff schedules, such as the inclusion of one category of gold and the exclusion of another.

Implementation turned out to be complicated due to the lack of clear guidelines and parameters. For example, why did Vietnam receive a 20 percent tariff while Malaysia received 18 percent, Indonesia 19 percent, the United Kingdom 10 percent, and the European Union, South Korea, and Japan 15 percent? Tariffs were imposed pursuant to a formula that was at best arbitrary rather than based on a clear guiding principle. The result was massive uncertainty in the market, evidenced initially in the bond market immediately after Liberation Day, which then led to implementation delays and downward revisions in the tariffs. Apparently, someone decided tariffs were a good idea and ordered staff to develop a set of them without much guidance as to what they were supposed to accomplish.

This became even more evident during the negotiation of multiple agreements on reciprocal trade, where the other countries found themselves asking the U.S. negotiators exactly what the United States was looking for and getting no definitive answers. Worse, when they asked whether the United States would commit to making no further demands once agreement had been reached—in other words, a commitment not to move the goalposts—the answer was “no.” That probably explains why some of the agreements have remained as frameworks and why some countries, notably India, are slow-rolling concluding them. Uncertainty generated by U.S. court rulings and Trump’s tendency to sharply shift course has left both U.S. negotiators and other governments in trade purgatory, the former not sure what they are supposed to do and the latter waiting to learn their fate.

Another recent example of implementation confusion is the imposition of 50 percent tariffs on some Canadian imports pursuant to Section 338 of the Tariff Act of 1930. The basic idea appears to have been “let’s punish Canada.” Hapless bureaucrats were then tasked with developing a list of items that would be subject to the tariffs. If any policy guidance was given, it appears to have been simply to avoid items that were politically sensitive in the United States. That has turned out to be a moving target. Last week, Trump directed the removal of tariffs on some items, including a lot of paper and cardboard items, plastic bags, selected machinery, and seaweed and algae, many of them important to Maine, and the imposition of new tariffs on others, including air conditioners, carpet, archery equipment, coffins, shampoo, and parts for yachts. We will shortly find out where those imports have been going when their recipients complain, and if it turns out to be in Michigan, Minnesota, or other states with key Senate races, we should expect further revisions. When you are robbing Peter to pay Paul, it is hard to keep up.

The lesson here is not about who is an ant and who is a grasshopper. Rather, it is about the importance of having well-defined goals from the start with clear instructions to those charged with implementation on what they are supposed to do. When the government fails to do that, it doesn’t lead to starving grasshoppers, but it does lead to unexpected downstream consequences and uncertainty that suppress growth and investment.

William A. Reinsch is a senior adviser (non-resident) and Scholl Chair emeritus with the Economics Program and Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C. He can be reached at [email protected].