Rent-seeking others into the slammer

Paul Larkin Senior Research Fellow, Heritage Foundation
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At least the Gibson Guitar Corporation can stop fretting.

Last week the Justice Department cut a deal with the Nashville-based instrument maker, dropping charges that Gibson had imported wood products in violation of the Lacey Act — a federal law that makes it a U.S. crime to import flora in violation of any other nation’s law — though it looks like the Justice Department was motivated more by a desire to save the Lacey Act than it was by any concern for justice.

When the Justice Department filed criminal charges against Gibson, the company’s plight — and the vulnerability of its customers, past and present, to similar charges — became an instant cause célèbre within the politically potent music industry. Democratic Tennessee Congressman Jim Cooper promptly introduced the RELIEF Act, a bill that would have amended the Lacey Act to help Gibson.

Yet shortly before recess, the House Republican leadership pulled the RELIEF Act from a floor vote. A Congressional Quarterly story reported that objections from 24 Virginia forest products companies prompted a Virginia representative to withdraw the bill. The Virginia companies objected to the RELIEF Act on the grounds that it would make it easier for companies to import wood. The Congressional Quarterly article noted that environmental groups were working with some members of the business community to scuttle the bill.

What the Virginia businesses did is a classic example of what economists call “rent-seeking”: namely, using governmental power to prevent competition. Rent-seeking, unfortunately, often works because a small group can unite around a specific issue, while the public generally is concerned with the full range of issues. Industry will claim without proof that it is saving employees’ jobs without needing to admit to consumers that they will pay higher prices. Environmentalists get the result they want by making sure that industry is the first and only platoon to charge out of the trench.

The problem is that this is not a poli-sci seminar. Under Lacey, morally blameless parties can and do go to prison. The Lacey Act makes it a federal offense to violate a foreign law in the process of importing flora or fauna. It places American citizens in the absurd position of being criminally liable for not knowing foreign law.

Environmentalists and, in this instance, industry will say that this scenario can’t happen. Wrong. Just ask the dozens of people the feds have sent to prison for making that mistake. And the government refuses to say it won’t happen again — because it will.

No one wants to stand up and say that it’s sensible to expect American businesses to know every environmental law extant in the world today if they want to avoid jail time. So instead, environmentalists hide behind business, and business is dead silent on that prospect. Why? Because each company is willing to take a chance that it won’t be charged — or that, if it is, lower-level employees will take the fall, whereas increasing the amount of imports into this country will lower the prices that every company can charge consumers.

The RELIEF Act would not wholly solve this problem because (as reported out of committee at least) it would not decriminalize the Lacey Act and would not eliminate references in the Lacey Act to foreign law. But the perfect should not be the enemy of the good. The RELIEF Act is a small step, but at least it’s a step in the right direction.

Rent-seeking behavior is bad enough, but it becomes reprehensible when it puts morally blameless parties at risk of going to prison. Let the members of the Virginia wood products industry testify before Congress that people who have no idea they were violating an Indian lumber law should be thrown in the slammer for the sake of maximizing industry profits. Then we’ll start the debate.

Until industry is willing to take that position in public, Congress should not be swayed by letters like the one reported by Congressional Quarterly.

Paul J. Larkin, Jr., is a senior legal research analyst at The Heritage Foundation (www.heritage.org).