French fashion, food, wine and now a French giraffe.
Most French moms buy Sophie for their newborns. Seven inches tall, with brown spots, black eyes and pink cheeks, she is just a rubber toy giraffe that squeaks. In French supermarkets, her price is $12.
In the U.S., Sophie is a $25 giraffe with cachet. Exactly the same as her French sisters, her “Made in France” label, her natural rubber body, and her small-scale production differentiate Sophie from mass produced Chinese baby toy imports like Elmo and Big Bird. In the U.S., because Sophie is special, her sales are soaring.
Sophie reminds me of Levi’s in Communist Russia. Patented in 1873, Levi’s have always been utilitarian. However, in the former Soviet Union approximately 20 years ago, their “made in the U.S.A.” label made them a fashion icon .
The Economic Lesson
Looking at the total value of toy, doll and game imports from January to September, 2011 for 25 countries, France is #19 at $6 million. At the top of the list is China, then Japan and Mexico.
Because numbers from the St.Louis Fed indicate the U.S. imports more from France than we export to France, our trade balance is negative.
An Economic Question: Discussing trade, economists typically mention David Ricardo and the law of comparative advantage. Might French toy manufacturers have a comparative advantage over China?
The U.S. government had to decide whether X-Men are human.
Our story starts with the U.S. Customs office. Included in a very long list of items that enter the U.S. are “dolls” and “toys.” According to Customs officials, any figure that clearly represents a human being is a doll; if not, then it is a toy. Importers care about the difference because the tariff on dolls (12%) is much higher than toys (6.8%).
And that takes us to Marvel Comics. While we all can agree that Barbie is a doll, what about action figures? The U.S. Customs office said action figures are dolls; Marvel disagreed. This Radio Lab podcast wonderfully describes the issues.
Marvel won its case in court. Similarly, because Luke Skywalker could resist the force and was captured by a Wampa, a court also said he was a toy. By contrast, G.I. Joe was declared a doll.
The Economic Lesson
When looking at tariffs, as economists, we should check the cost of the jobs that were saved. This 2002 Dallas Fed report concluded that each year, a tariff on sugar costs consumers $1,868 million in higher prices. More specifically, each one of the 2261 jobs that was saved costs $826,104 annually.
An economic question: Explain why tariffs generate considerable support even when their cost is high.