"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." — President Barack Obama
Elaine Chao, former U.S. Secretary of Labor, outlines her hope that the president’s actions live up to his words when it comes to free trade (the above quote is taken from an open letter he wrote for publishing just before the recent G-20 Summit). In a column penned for the Heritage Foundation, she contends that history has proven the inherent flaws in protectionism :
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.
She also claims Obama is off to a rough start, as he signed off on some protectionist measures included in the recent stimulus bill. Read the entire column and let us know what you think.