The other day my daughter and her fiancé and I were at a Volkswagen dealership looking to buy a car as they will be moving to Canada in April. In conversation it was noted that they already had a VW in Australia – an Amorak, which is a superb high-end pickup truck. The Amarok is not sold in Canada (or the United States). “Why not?” I asked. “That,” said the salesman, “is a long story. Google Volkswagen and Chicken Tax to get the answer. So I did.

The Chicken Tax was a tariff imposed on potato starch, dextrin, brandy and light trucks in 1963 by the United States. It was a tit for tat response to tariffs imposed by France and West Germany on U.S. chickens. The period from 1961-1964 was actually known as the Chicken War.

As explained in Wikipedia, chicken had been an expensive delicacy in Europe up until the sixties. But cheap American chickens changed all that. Consumption rose and American chicken dominated the market, making up almost half of all chicken sales.

Charges of dumping arose. The Germans even accused the Yanks of “fattening chicken artificially with arsenic”. Tariffs were imposed, first by France and then by Germany. This resulted in a 25 percent decline in U.S. chicken exports.

Now you’ll remember that the early 60s were a time of a festering cold war, the Bay of Pigs fiasco and the Cuban missile crisis. Yet Senator William Fullbright interrupted a NATO debate on nuclear disarmament to raise the far more important issue of “trade sanctions on U.S. chicken, going so far as to threaten cutting U.S. troops in NATO.” German Chancellor Konrad Adenauer later reported that half of his correspondence with U.S. President John F. Kennedy was over chickens.

After diplomacy failed, “on December 4, 1963, President Johnson imposed a 25 percent tax (almost ten times the average U.S. tariff)” on the aforementioned items. The tariff took effect on January 7, 1964.

How did trucks get into the mix you might ask. Politics! Lyndon Johnson wanted support from the United Auto Workers union for his civil rights plans. And he wanted to avoid a strike before the 1964 election. UAW chief Walter Reuther wanted the President to stifle the import of Volkswagen trucks to the U.S. They kissed each other’s heinies and the rest is history.

Foreign auto makers found ingenious ways to circumvent the tax. First “Japanese manufacturers found they could export ‘cab-chassis’ configurations (which included the entire light truck, less the cargo box or truck bed) with only a 4% tariff.” So they sold cab-chassis to the U.S. and had a truck bed added in America with the finished vehicle sold as a light truck. Many of these sales were sub-contracts to Ford and Chevrolet. Not to be outsmarted by private interests, the government closed that loophole in 1980.

In 1978, Subaru discovered they could add two extra seats to a truck (a crew cab in effect) and the vehicle would be classified as a tariff free passenger vehicle, not a light truck.

Major Japanese manufacturers eventually built plants in the U.S. and Canada. But Mercedes found a different way to get around the chicken tax. “From 2001 to 2006, cargo van versions of the Mercedes and Dodge Sprinter were manufactured in assembly kit form in Germany and shipped to a factory in South Carolina for final assembly with a proportion of locally sourced parts complementing the imported components.” Complete units would have been subject to the tariff, but in kit form they were tax exempt.

But the real kicker was Ford’s response. “Ford imported all of its first generation Transit Connect models as passenger vehicles by including rear windows, rear seats, and rear seatbelts. The vehicles are exported from Turkey, arrive in Baltimore, and are converted back into light trucks at (an American) facility by replacing the rear windows with metal panels and removing the rear seats and seatbelts. The removed parts are not shipped back to Turkey for reuse, but shredded and recycled in Ohio. (emphasis added) The process costs Ford hundreds of dollars per van but saves thousands in taxes.”

Chrysler announced plans to do the same in 2015.

Over the almost fifty years since the tariff was enacted, all the other parts of the tariff have been dropped. Potato starch, dextrin and brandy have been removed from the act. Only light trucks remain.

Wikipedia notes that Harvard’s Robert Z. Lawrence, a professor of International Trade and Investment, “contends the chicken tax crippled the U.S. automobile industry by insulating it from real competition in light trucks for forty years.” The Cato Institute called it “a policy in search of a rationale” in its 2003 study, Ending the Chicken War: The Case for Abolishing the 25 Percent Truck Tariff.

In this study, report author Daniel J. Ikenson notes that domestic producers now control “87 percent of the U.S. pickup truck market.” Its only usefulness now, says Ikenson, is as a bargaining chip in trade negotiations. But since the Japanese already manufacture in the States because of the tariff, that point is virtually moot.

Now in his classic book, Economic Sophisms, Frederic Bastiat tells a fable using the fictional character of Robinson Crusoe. Seems Crusoe was an enterprising fellow and about to cut down a tree with his axe and make a plank. But good fortune smiled on Crusoe and a plank conveniently washed ashore on his little island. A lucky accident? You’d think so, but Crusoe, schooled in the protectionist school of thought and the labor theory of value thought differently.

“If I go to get that plank,” he thought, “it will cost me only the exertion of of carrying it, and the time needed to go down to the beach and climb back up the cliff.

“But if I make a plank with my axe, first of all, I shall be assuring myself two weeks’ labor; then my axe will will become dull, which will provide me with the job of sharpening it; and I shall consume my provisions, making a third source of employment, since I shall have to replace them. Now labor is wealth. It is clear that I shall only be hurting my own interests if I go down to the beach to pick up that piece of driftwood. It is vital for me to protect my personal labor, and now that I think of it, I can even create additional labor for myself by going down and kicking that plank right back into the sea!”

As absurd as that may seem, when I read about the chicken tax, it made me think of Bastiat’s Crusoe story for the results of the tax are just as absurd.

The chicken tax is an absurdity in an age when free trade has been recognized as beneficial by almost everyone. The people really being hurt by this tax are American and Canadian consumers. Their options are reduced as some European manufacturers like Volkswagen don’t even bother trying to sell Amoraks or other light trucks here. And prices are higher than they should be as Ford and others actually engage in destruction – kicking the planks back – because of this tax.

That the other aspects of this tax have been repealed and only light trucks remain covered by it is absurd. That the tariff is ten times the normal tariff rate is absurd. That even American companies like Ford are engaging in wanton destruction to avoid the tax is absurd. And that the tax on light trucks came about because of graft in the Lyndon Johnson administration is criminal.

If there is anything good about this tax, it is that it is great fodder for an absurdist comedy and stand-up comedians. It needs to be ridiculed for the ludicrous outrage it is.

This article was previously published at The Jolly Libertarian on January 12th and in edited form at the Foundation for Economic Education as Chicken Tax Makes Trucks Expensive and Unavailable on January 16th. This version retains most of the language of the original but adapts a major change which moved the Crusoe story towards the end of the article.