Excessive Regulations: The Case of Gibson Guitars


Posted by Kelsey Zahourek on Wednesday, October 12th, 2011, 5:19 PM PERMALINK

The following is cross-posted from the Property Rights Alliance

The jobs issue is, rightly so, on the mind of nearly everyone in Washington these days. With the defeat of the President’s so-called “jobs bill” in the Senate, the White House vowed to push forward measures one-by-one that would be job creators. One area to begin is by looking at the impact of burdensome federal regulations on the economy and jobs and immediately seek to reform or eliminate the vast majority.

Earlier this week, the Property Rights Alliance wrote about abuses that occur under the Endangered Species Act. The piece highlighted how expansion of ESA regulations has cost cattle ranchers, farmers, and businesses their livelihoods and countless jobs. The timber industry in the Pacific Northwest was nearly wiped out due to the spotted owl being placed on the list. My colleague, Christopher Prandoni has written about how proposed regulations by the Environmental Protection Agency will cost hundreds of thousands of jobs in the energy, infrastructure, and technology industries.

Another out of control regulation is the little known Lacey Act, originally passed in 1900 to regulate the trade of wildlife and expanded in 2008 to curb illegal logging. Under the Act, if the U.S. government interprets that a foreign law, concerning the exportation of wood or wildlife, has been broken it is up to the U.S. government to conduct raids and confiscate said products.

The Heritage Foundation recently wrote about overly broad criminal prosecution under the Lacey Act. Heritage cites an example where a small business owner spent six and a half years in confinement because he used plastic instead of cardboard to wrap fish, which federal prosecutors determined violated Honduran law. (The Honduran government said otherwise).

The most recent case that brought problems with the Lacey Act into the fore was the August 24 raid on Gibson Guitar’s Nashville and Memphis factories by armed federal agents. The Department of Justice seized 10,000 fingerboards, 700 guitar necks and 80 guitars as part of an investigation into whether the company had illegally imported ebony from India. All told, this raid has cost Gibson over $1 million and charges have yet to be brought against the company.

Gibson maintains its innocence and is still struggling to get back property from a 2009 raid (involving ebony imported from Madagascar), even though charges again were never brought against the company. Moreover, both Madagascar and Indian government officials have stated the exports were allowed under those countries’ laws. So apparently, not only does the DOJ interpret and enforce U.S. law, it has taken it upon itself to interpret, how they see fit, the laws of any nation on earth.

The Gibson case has nothing to do with conserving the world’s most valuable trees; rather this is protectionism at its worst. According to the Wall Street Journal, defenders of the regulations include the U.S. timber industry (the very industry nearly decimated due to another overly broad environmental regulation) believing “it has preserved U.S. jobs in timber, furniture and retail sectors and helped boost U.S. exports of wood products to foreign buyers…” In other words, one industry refuses to compete in the marketplace and therefore needs what is essentially a government subsidy at the expense of a vast number of U.S. businesses. The Administration tried to achieve the same results with “Buy American” provisions in the 2009 stimulus bill. What resulted was more expensive products for Americans and jobs lost because of higher input costs.

Gibson prides itself on making high quality guitars that produce an amazing sound. It just so happens that the materials needed to make the iconic instruments are located outside the United States. The only other option, as pointed out by four leading Republicans in the House, would be for Gibson to manufacture the guitars outside the U.S. with the same wood and then import them into this country. Under this scenario, they would be in compliance with the Lacey Act. Not a great idea for job creation, especially when Gibson added 600 employees to its workforce during a recession.

Additionally, Gibson Guitars would be first in line to talk of the importance of forest conservation. In the past, they have partnered with environmental groups, Greenpeace and the Rainforest Alliance to promote better forestry practices. Simply put, no more wood, no more guitars.

While being rather high profile, this is just another incident in a series of many that highlight the need for serious reform and elimination of thousands of federal regulations.
 

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