Negative Aspects of US Patenting Procedure

    Congress is presently in controversy over MTB's. Why should you be interested? Because most things that Congress does affects you and perhaps generations to come.    MTB stands for Miscellaneous Tariff Bills. Before we go into that detail, we need to know a little something about tariffs, which is another name for import or custom duties.
    When a material comes into the US from a foreign country, it must pass through import control. At that port location, Federal Customs Officers either allow free access of the material into the US, or they charge a fee depending upon the customs duty classification. This is standard procedure for most countries of the world. For example many years ago when I lived in Italy, I brought home a throw rug from Beirut and came into the airport at Rome. At that point, the customs officer charged me some x dollars in customs duties to bring the rug into Italy. An officer actually accompanied me to the bank to obtain the money, in order to pay the customs duty. This system operates on an international basis and involves huge sums of money.  In fact, prior to the establishment of the US Federal Income Tax, the operations of the federal government were funded primarily by import duties.
    While import duties are a source of income for the government funding, another purpose is to protect local suppliers or manufacturers. For example, there are steel manufacturers in the US and abroad. Generally, the price of imported steel from the foreign supplier is less than the price of the US manufacturer, usually because the foreign manufacturer has lower production costs. However, Congress sees a disadvantage in having to obtain all steel from foreign sources, which will be less reliable in times of emergency for production of military equipment, etc. Therefore, if applies a custom duty on foreign steel imports to equalize the price and perhaps also to give American suppliers a slight price advantage, so that they can stay in business.
    However, import duties have other ramifications. In the case of the steel example, after application of import duties, steel prices are higher for manufacturers of finished goods such as automobiles, refrigerators, water heaters, etc., and this carries through to higher consumer prices. However, the local steel manufacturers continue to offer jobs in the areas where they are geographically located. Where the balance for higher consumer prices and more local jobs lies is anybody's guess.
    Conversely, elimination of import duties favors importation of foreign manufactured goods, which is generally less costly than US manufactured goods. The US manufacturers of similar products cannot compete and go out of business, reducing the number of local jobs, but the consumer can buy at lower prices. Where the balance lies with respect to lower prices to the consumer and the loss of income by job loss is anybody's guess.
    Another aspect is the the relative standard of living. In the absence of custom duties, a low-cost foreign manufacturer will have jobs in his country. Those wages will increase the standard of living for the foreign population. Simultaneously, the export customers pay a lower price for their goods, but have reduced job income, with which to pay. An example for the US is textile manufacture. At one time, factories in the Northeast were humming with the manufacturer of basic textiles. Those facilities are now desolate, as most textiles are now imported. In addition, clothing manufacturer in New York City was a major business. This has departed to imports from many countries, such as Guatemala, South Korea, and China.
    With that background, we can now look at MTBs.
    The US has very large volumes of Custom Duty Manuals showing all manner of products. In addition to the types of goods, there is large variation in the dollar value and the product source to which customs duties are applied,. The Miscellaneous Tariff Duties  (MTBs) are basically a mechanism by which Congress establishes exemptions to the custom duties without changing duties themselves.
    A specific controversy involves chemicals. Over time, the chemical industry has established a global supply system, which involves company investments not only in the United States, but also in foreign countries. In many cases, there is an economic advantage to producing chemical intermediates abroad and importing them to the United States for further conversion to finished products. The economics of this procedure is only favorable in the absence of or very low custom duties on the intermediates.
    As an example, let's say XYZ company has the desire to build a plant to supply propylene (gas) which will be transformed to an acrylate monomer (liquid) and finally to a polymer (solid), which will be molded to various consumer products. It could build the plant in Houston, but also finds that it will have significantly lower production costs if it builds the plant in Thailand. Since the first product is a gas, which is difficult to ship, the Thailand plant will also go through the next step conversion to a liquid, which will be shipped to the US. All of this has favorable costs compared to complete manufacture in the US, providing there is no customs duty.
    Since the plant for conversion of liquid to the solid polymer would be in Houston and all are part of the same XYZ company, the company lobbies Congress for an MTB (duty exemption). Congress is than faced with a dilemma. If it grants an MTB, it loses duty on the liquid import, but it gains investment and job creation in Houston for conversion of the liquid to solid polymer. Alternatively, not applying an MTB forces the XYZ company to pay custom duty on the liquid and increase its total production cost. It may not then be able to compete with a complete foreign manufacturer, which exports solid polymer directly to the US.
    The consternation in Congress also arises with respect to "earmarks". Congress has generally agreed among its members to avoid earmarks, which are advantages given to a small segment of the population. An earmark example is the "bridge to nowhere" in Alaska, which benefited only the locals. Some say that a MTB in the case of the XYZ company is not an earmark, but in fact it is. While it theoretically benefits the polymer consumers, which might be the general public, it more specifically benefits the XYZ company and the city of Houston.
    All told MTBs can have associated advantages and disadvantages. However, one thing is clear. Elimination of custom duties from the US is unfavorable to the economy. While it generally reduces consumer costs, because foreign manufacturer is cheaper, it generates a loss of US jobs and the ability to improve standard of living through productive ability and capacity. Low prices of imports are temporary, while the productive capacity and know-how of the US is lost more or less permanently. However. If one is of a Marxist mentality, all import duties should be abolished, which will favor foreign manufacture and lead to global equalization of wealth, which is a Marxist goal.