The Fascination with Protectionism

The Club for Growth sponsored 1,028 economists from all 50 states to pressure not to enact protectionist policies against .  Congressional Democrats have been rattling their sabers for months now with any number restrictive trade policies.  Not only is the trade helpful to both countries, but buys billions of dollars of low interest treasuries with their American dollars, keeping rates low.  We shall cover the reasoning on trade in other posts.  Here’s the 2007 petition in the Wall Street Journal this morning.  It is deliberately reminiscent of the 1930 petition (PDF) also signed by 1,028 economists as it ran in the New York Times, in hopes of dissuading the government from signing the Smoot-Hawley Tariff Act.  The 1930′s petition was not successful and the resulting tariffs helped drive the nation into depression.

Petition

Concerning Protectionist Policies Against

We, the undersigned, have serious concerns about the recent protectionist sentiments coming from , especially with regards to . By the end of this year, will most likely be the United States’ second largest trading partner. Over the past six years, total trade between the two countries has soared, growing from $116 billion in 2000 to almost $343 billion in 2006. That’s an average growth rate of almost 20% a year. This marvelous growth has led to more affordable goods, higher productivity, strong job growth, and a higher standard of living for both countries. These economic benefits were made possible in large part because both and the United States embraced freer trade. As economists, we understand the vital and beneficial role that plays in the world economy. Conversely, we believe that barriers to destroy wealth and benefit no one in the long run. Because of these fundamental economic principles, we sign this letter to advise against imposing retaliatory trade measures against . There is no foundation in economics that supports punitive tariffs. currently supplies American consumers with inexpensive goods and low-interest rate loans. Retaliatory tariffs on are tantamount to taxing ourselves as a punishment. Worse, such a move will likely encourage to impose its own tariffs, increasing the possibility of a futile and harmful trade war. American consumers and businesses would pay the price for this senseless war through higher prices, worse jobs, and reduced economic growth. We urge to discard any plans for increased protectionism, and instead urge lawmakers to work towards fostering stronger global economic ties through .

will continue to push this issue.  Like bail-outs of large institutions, it is easier to do something, even the wrong thing.   Paid re-training programs would be a much better choice, if the government can’t stay out of it altogether.  Meanwhile The New York Times published this incredible article of a few days ago.

This story will be exhilarating to watch, for the stakes can hardly be higher.

References

MacQuarrie, David. “Governments hate protectionism, at least everyone else’s version of it.” CBC News, February 3, 2009. http://bit.ly/7ockb8.

Six Questions for Eric Janszen on the Economic Collapse—By Rafil Kroll-Zaidi (Harper’s Magazine). http://harpers.org/archive/2008/10/hbc-90003696 (accessed October 22, 2008).

Leis, Jim. “Globalization or Isolation.” Leis Network, July 23, 2007. http://bit.ly/6LPTZe.  In which I explain trade.

The protectionist Smoot-Hawley Act, which sent U.S. tariffs soaring after the 1929 stock market crash, "is widely recognized as having significantly contributed to the Great Depression," Jason Langrish, of the Canada Round Table for Business, said in an e-mail. Financial crisis threatens Canada- . http://www.canada.com/calgaryherald/news/story.html?id=5a92be1d-5f22-4f85-9ec4-c3d576ddf14d (accessed October 22, 2008).

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