April 13, 2009
By Elaine Chao
The news media devoted considerable attention in the last
election to the allegedly false patriotism of American flag lapel
pins. Americans would be well-served in 2009 if more press coverage
was devoted to exposing the folly, and false patriotism, of trade
We have been down this road before. The Tariff Act of 1930,
sponsored by Sens. Reed Smoot and Willis C. Hawley, is infamous for
deepening and prolonging the Great Depression. When the
Smoot-Hawley bill landed on President Herbert Hoover's desk, more
than 1,000 economists urged him to veto it. Tragically, the
president ignored their pleas. Other nations retaliated, and
America learned a painful lesson.
By 1932, U.S. exports to Europe were just one-third of what they
had been in 1929. The precipitous drop claimed many jobs,
contributing to the economic misery that saw the U.S. unemployment
rate soar to 25.1 percent in 1933 from 7.8 percent in 1930.
Americans did not suffer alone. World trade overall fell two-thirds
in the first few years of the Depression.
Today it is apparent that some in Washington have forgotten that
history or never bothered to learn it. Lawmakers at home, as well
as abroad, are embracing protectionism for the 21st Century that
threatens to make an already severe economic crisis even worse.
The World Bank recently reported that, since the beginning of
the current economic crisis, countries around the world have
enacted 47 measures that restrict trade at the expense of other
nations. These instigators include the United States and 16 fellow
members of the G-20 whosigned a pledge just four months ago to
eschew protectionist measures.
In Washington, architects of the stimulus bill -- officially
titled the American Recovery and Investment Act of 2009 -- blithely
ignored the Great Depression's teaching that trade protectionism is
a sure economic loser. Thankfully, the protectionist provisions in
the stimulus bill signed by President Barack Obama are not on the
disastrous scale of those approved by Hoover. But they are not
inconsequential. They sent a damaging message to the rest of the
world, prompted warnings from America's trading partners and
further eroded confidence here at home among those who know that
retreating from free trade will further imperil America's
The "Buy America" provision ("Dig a moat around America") in the
stimulus package did more than squander America's credibility on
international trade. It also created bureaucratic hoops that will
slow down spending the stimulus funds on projects that are supposed
to energize our economy. Indeed, law firms are counseling
contractors and subcontractors to carefully vet their supply chain.
One advises: "establish auditable record-keeping and compliance
measures, particularly with respect to imported products." The more
complicated the contracting process becomes, the less interest
small-business owners will have in participating and the more
difficult that participation becomes. That will severely dampen the
stimulative power of the funds, as small business is the engine
that creates two-thirds of net new jobs in this country.
An even more blunderbuss exercise in protectionism was inserted
into the 2009 omnibus appropriations bill, signed into law March
11. That protectionist provision, lobbied for by the Teamsters
union, targeted Mexican trucks that had been allowed to haul
freight as part of an effort to bring the U.S. into conformance
with the North American Free trade Agreement.
Mexico, the United States' third-biggest trading partner, wasted
no time in responding in-kind. Our neighbors to the south promptly
announced new tariffs on 90 American products -- including fruits and
vegetables, processed foods, Christmas trees and an assortment of
While this salvo is not a huge blow to our entire economy, it
will severely affect the targeted sectors and is emblematic of the
fact that America's own protectionist impulses do not occur in a
vacuum. Other countries can, and will, retaliate.
In the lead-up to the recent G-20 summit in London, a letter
from Obama appeared in 30 newspapers around the world, including
the Chicago Tribune. It wisely stated: "As we go forward, we should
embrace a collective commitment to encourage open trade and
investment, while resisting the protectionism that would deepen
this crisis." The president must square his deeds with his words.
If he does not stand up to the protectionist inclinations in his
own party, America's economy will only deteriorate further.
Elaine L. Chao was secretary of labor in the Bush
administration from 2001 to 2009 and is a distinguished fellow at
The Heritage Foundation.
First appeared in the Chicago Tribune
The news media devoted considerable attention in the last election to the allegedly false patriotism of American flag lapel pins. Americans would be well-served in 2009 if more press coverage was devoted to exposing the folly, and false patriotism, of trade protectionism.
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