Protectionist Rhetoric is Dangerous

Shipping_ContainersBy Milton Ezrati

The National Interest

The need to fight protectionism may well stand as one of America’s clearest and most vital national interests. From the voting booth to the country’s foreign-policy establishment, action is needed to defend free trade and shift away from past, unnecessarily partisan trade policies. Protectionism has destroyed prosperity time and again. The most dramatic illustration emerges from the history of the Smoot-Hawley tariffs of the 1930s. Sen. Reed Smoot and Rep. Willis Hawley, both Republicans, wanted to protect American jobs and industry from the ill effects of the 1929 stock market crash by building a tariff wall around the economy. Their legislation raised duties on some twenty thousand products by an average of 20 percent. Its immediate effect was devastating. The tariffs cut already hard-pressed workers and consumers off from lower-priced imports that had held down living costs and had helped sustain living standards in an already pressured situation. By denying American producers lower-priced imported inputs, the tariffs forced them to cut back even more than they already had, including their payrolls. Then, when the country’s trading partners retaliated with tariffs of their own, America’s global sales collapsed.

There can be little doubt that these effects deepened the Great Depression. World trade dropped 67 percent in the two years following the bill’s passage. Imports fell 40 percent, while exports fell some 75 percent. There is even evidence that the tariffs actually caused the Great Depression. Before they took effect in June 1930, business activity had actually begun to recover from the effects of the 1929 crash. Unemployment, which had hit 9 percent of the workforce early in 1930, had declined by June to 6.3 percent. After Smoot-Hawley passed into law on June 17, unemployment began to climb again, eventually verging on 25 percent. Certainly, the stock market anticipated the damage. It fell 10 percent the day President Herbert Hoover signed the bill into law.

For all this evidence, protectionism seems to retain a perennial appeal. AFL-CIO President George Meany in the 1960s and 1970s was famous for describing free trade as “a joke and a myth.” He consistently demanded “tighter restrictions on imports.” Each of his successors has done the same in one way or another. Presidents John F. Kennedy, Jimmy Carter and George H. W. Bush felt obliged, from time to time, to play to protectionist sentiment. JFK, though he imposed no restraints on trade, voiced concern several times over a “de-industrializing” economy. Countless books and magazine articles in almost every time period have made protectionist pleas. President Bush in the 1980s, no doubt in response to Japan’s great export successes, complained often of “unfair trade practices.” Sen. Lloyd Bentsen, a Texas Democrat, worried that because of trade “American workers [would] end up like the people of the Biblical village who were condemned to be hewers of wood and drawers of water.” Financier Felix Rohatyn also worried about “de-industrialization” and fretted that trade would make the United States “a nation of short-order cooks and saleswomen.”

This century has heard still more strident protectionist rhetoric, while Washington has shown a greater inclination to act on it. Early in his administration, President George W. Bush briefly imposed tariffs on imported steel. President Barack Obama imposed several select tariffs, most dramatically on tires from China. Proposals for more general import duties emerged in 2005 when Sens. Chuck Schumer and Lindsey Graham proposed 27.5 percent tariffs on all Chinese goods, a bipartisan bill that received the backing of sixty-seven senators. Though this bill never became law, both Republican and Democratic Congresses have since advanced over fifty pieces of antitrade legislation.

Continue to full article . . .

Picture: https://commons.wikimedia.org/wiki/File:Line3174_-_Shipping_Containers_at_the_terminal_at_Port_Elizabeth,_New_Jersey_-_NOAA.jpg

Advertisements

Leave a Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s