Willis Hawley and Reed Smoot thought they had a great idea.
Hawley chaired the House Ways and Means Committee. Smoot oversaw the Senate Finance Committee. Faced with a national economic meltdown, they brainstormed ways to jump-start the economy. Their solution was new tariffs.
The Smoot-Hartley Tariff Act of 1930 slapped duties on about 20,000 imports. Rather than spur consumption and production of American goods, it sparked an international trade war. By 1932, American exports to Europe were just one-third of what they had been in 1929. Worldwide trade fell two-thirds as other nations retaliated.
The protectionist measure protected nothing. jobs evaporated. The Stock Market Crash of 1929 deepened into the worldwide Great Depression that stretched to the outbreak of World War II.
Thankfully, Washington today isn't considering Smoot-Hartley II. But that doesn't mean there won't be trade skirmishes. Shots have already been exchanged.
The stimulus bill enacted earlier this year contained protectionist "Buy America" provisions that have angered our trading partners. The New York Times reports the action "has reopened the debate in Canada [our largest trading partner] about the value of the North American Free trade Act and the trustworthiness of the United States as a trade partner." In June, Canada's mayors endorsed retaliatory measures against the U.S.
America was further discredited on trade when President Obama signed Teamsters-backed legislation targeting trucks from Mexico that haul freight into the U.S. Mexico is our third-largest trading partner. It promptly announced retaliatory tariffs on 90 American exports.
And now the administration is considering slapping tariffs on Chinese-made tires.
Anti-trade measures that undermine our prosperity are bad enough. Those that threaten both our prosperity and our security are worse. And that's happening with alarming regularity.
Congress continues to insert "Buy America" provisions into defense legislation that limits where the Pentagon can buy what it needs. These prohibitions are just wrong.
It's hard to argue that defense companies need protection from foreign competition. Even in an era of recession, the U.S. defense sector exports far more than it imports. In 2008, imports amounted to about $2 billion. Exports were eight times greater, some $16 billion.
And it's not like the Pentagon is splurging on purchases from foreign suppliers. In 2007, for example, the Pentagon spent about $316 billion on contract work. Foreign companies got $18.6 billion of that business -- less than 6 percent.
In contrast, international defense programs where the U.S. shares development and production with trusted and dependable allies produce real benefits. Typically these programs reduce costs, spur innovation and -- perhaps most importantly -- promote interoperability (allowing allied militaries to work closely together because they share common equipment).
Certainly in matters of national security, not all trading partners are equal. America's closest allies have proven reliable sources for nearly all defense materials. Protectionist legislation that discriminates against defense cooperation with the countries that have fought side-by-side with us from Baghdad to Kabul makes no sense.
The real danger to the U.S. defense industrial base is not foreign competition. It is Pentagon budgets that are too anemic to buy the modern systems our military will need to protect us in the future.
Increasingly, procurement (buying stuff) accounts for less and less of the Pentagon budget. This year, about 64.5 percent of the budget will go to pay for operations, maintenance and personnel costs (such as pay and health care).
Only about 31.4 percent goes to the "procurement" budget and, of that money, only slightly more than half goes to actually buying new systems. With less money to buy weapons, defenses, vehicles and other equipment, the Pentagon "stretches out" its orders, buying smaller amounts over a longer period of time. In the end, the armed forces wind up spending more and working with less -- and older -- equipment.
Congress just doesn't get it. Last week, it rushed through legislation to spend up to $3 billion for "Cash for Clunkers." That $3 billion could have offset the entire missile defense cut in this year's defense budget and bought more than a half dozen F-22s. It would have saved highly skilled, good-paying American jobs and supported industries vital to our national security.
Buy America provisions that provoke retaliatory measures against U.S. foreign military sales are a double whammy to the defense sector. Instead of trying to buy off constituents with counter-productive protectionist measures, Congress should live up to its constitutional obligation to "provide for the common defense."
James Jay Carafano is Senior Research Fellow in national security policy at The Heritage Foundation.
First Appeared in the DC Examiner