August 18, 2009
By James Jay Carafano, Ph.D.
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
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
And now the administration is considering slapping tariffs on
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
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
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
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 --
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
James Jay Carafano is Senior
Research Fellow in national security policy at The Heritage
First Appeared in the DC Examiner
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.
Protect America Initiative of the Leadership for America Campaign
James Jay Carafano, Ph.D.
Vice President, Foreign and Defense Policy Studies, E. W. Richardson Fellow, and Director
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