• U.S.

Protectionism:: Requiescat in Pace

8 minute read

IN Silver Blaze, one of Sherlock Holmes’s cases, a highly important clue is the fact that on a significant occasion a dog did not bark. Similarly, one of the most revealing facts about the U.S. in 1962 is that protectionists—advocates of high protective tariffs—are doing remarkably little barking at a time when they ought to be baying fiercely. President Kennedy’s Trade Expansion Act, now being worked over by the House Ways and Means Committee, pushes far beyond the old reciprocal trade program. It would empower the President to slash U.S. tariffs by 50% or more—all the way down to zero on important categories of manufactured goods (TIME, Jan. 26 et seq.). But against this grave challenge, the protectionists have put up a flabby fight. The vigor and zeal of yesteryear are gone.

As a cause and as a doctrine, protectionism is virtually dead in the U.S. When a cause dies, it does not suddenly vanish; it recedes as a spent wave retreats from a rocky beach, leaving behind scattered little pools. So it is with protectionism.

Businessmen and workers who make pottery, window glass, carpets, hats, bicycles, and many other kinds of goods still argue for tariffs ,to protect themselves against competition from abroad, but they no longer argue for tariffs in general. And their tone has changed: in hearings before the Ways and Means Committee this year, they sounded rather plaintive and apologetic. Many pleaders for particular protection even felt constrained to tell the committee that in principle they favored freer trade and agreed with the purposes of the bill.

The feebleness of the protectionist defense is all the more striking in view of protectionism’s deep roots in U.S. history. The very first bill ever introduced in the House of Representatives was a tariff measure; while the essential purpose was to raise revenue, the preamble noted that an additional benefit would be “encouragement and protection of manufactures.” Two years later, in his Report on Manufactures, Treasury Secretary Alexander Hamilton urged tariff increases to foster U.S. industries.

In the 1820s, protectionism became a flaming national issue, with Henry Clay advocating a tariff-walled “American System” and Daniel Webster speaking for freer trade. The debate produced some highly emotive rhetoric. New Jersey’s Democratic Representative George Holcombe warned in a House speech that without protective tariffs the nation would see “your agriculture languishing, commerce declining, manufactures perishing, your—but, sir, I cannot, will not finish the picture. It is too utterly repulsive.”

The protectionists succeeded in raising tariffs in 1824 and again in 1828’s “Tariff of Abominations,” as its enemies called it. But excessively high tariffs tend to choke off international trade and push up domestic prices, and the Tariff of Abominations stirred up impassioned opposition. South Carolina even enacted a Nullification Ordinance that declared the 1828 tariffs void within the state. The boomerang result of the 1828 Tariff Act was a freer-trade movement that prevailed in Congress from the early 1830s until the Civil War brought on a new surge of protectionism.

For decades after the 1880s, tariff policy was a central issue of conflict between the two parties, with the Republicans protectionist and the Democrats, whose main electoral-vote strength was in the cotton-exporting South, favoring lower tariffs. Freer trade made a comeback under Woodrow Wilson, but in 1922, under Warren Harding, the Republicans upped tariffs to record-high levels. In 1930 the Tariff Act concocted by Utah’s Senator Reed Smoot and Oregon’s Representative Willis Hawley topped even the 1922 peak. When Congress passed the Smoot-Hawley bill, Tennessee’s Democratic Congressman Cordell Hull, longtime advocate of freer trade, visibly wept.

Coming at a time when the Western world was already sinking into an economic slump, the Smoot-Hawley tariff increases led to a wave of retaliatory trade barriers in Europe. The blockages slowed down already sluggish international trade, bringing on an international monetary crisis and deepening the oncoming Depression. One indirect but traceable result was Germany’s jolting economic collapse, which in turn led to Adolf Hitler’s swift rise to power.

In 1934, after terrible damage had been done, Congress passed the Reciprocal Trade Agreements Act, authorizing the President to cut U.S. tariffs in return for like concessions by other countries. Principal framer of the act: ex-Congressman Hull, then serving as F.D.R.’s Secretary of State. Congress has since voted to extend the reciprocal trade program eleven times. Reversing Republican tradition, the Eisenhower Administration embraced reciprocal trade, making it a national rather than a Democratic program. During the lifetime of reciprocal trade, U.S. tariffs have gradually been reduced from an average of roughly 50% of value under the original Smoot-Hawley schedules to about 11% today.

Despite the success of the reciprocal trade program, protectionism remained a highly audible force in the U.S. during the 1950s. The reciprocal trade extension battles in Congress were often hard-fought. And in the last few years, with the U.S. feeling keener competition from rebuilt Western Europe and Japan, it sometimes seemed that protectionism was getting stronger rather than weaker, especially among labor unions disturbed about unemployment.

Under these circumstances, 1962 hardly seemed an auspicious time for President Kennedy to put forward his “bold new instrument,” as he called the Trade Expansion Act. Some Administration officials and some Democrats in Congress advised him to delay the trade bill for a while until the economy perked up and unemployment declined.

The trade bill has indeed aroused plenty of criticism—but not the kind that was expected. Conservatives have complained that the bill confers upon the President needlessly sweeping and ill-defined powers. Proponents of freer trade have pointed out that it fails to deal with import quotas and other nontariff restrictions on trade. Such diverse critics as the Wall Street Journal, a liberal economist writing in the New Republic, the middle-roading Committee for Economic Development, and the Ways and Means Committee’s Chairman Wilbur Mills have attacked the bill’s concept of “adjustment assistance” for business firms and workers injured by increased imports. These complaints are not protectionist at all.

The most powerful protectionist force against the Kennedy trade program is not U.S. but European protectionism. The trade bill is essentially a response to the challenge of the European Common Market, an attempt to ensure that U.S. exports will not get fenced out by the joint external tariff wall that the Common Market has already begun building. But Common Market countries are far from enthusiastic about the bill’s objective; they want their external tariff wall to be a real wall. An especially troublesome protectionist plan contemplated by the Common Market is a system of variable “fees” on agricultural imports, with the fees set high enough to keep imports from competing with Common Market farm products.

That prospect is highly disturbing to spokesmen for U.S. farmers. The American Farm Bureau Federation urged Congress to amend the trade bill so as to bar the President from negotiating any tariff concessions with the Common Market if it goes ahead with its fee plan. The Administration protested that this amendment would paralyze the workings of the trade bill. Last week the Ways and Means Committee resolved the impasse by voting a compromise amendment that incorporated the Farm Bureau proposal but made it not binding on the actions of the President.

It is ironical that the only important amendment attached to the Kennedy trade bill so far is a response to European rather than U.S. protectionism. U.S. protectionists have failed to make a single dent in the bill.

Why have U.S. protectionists become so weak? One reason is that Kennedy disarmed some of the expected opposition in advance—labor unions by promising adjustment assistance, textile manufacturers by setting up a system of “voluntary” quotas on foreign textile exports to the U.S. But a far deeper and stronger force has been at work in recent years, eroding away the vigor and relevance of protectionism: the U.S.’s growing awareness that its own safety, welfare and prosperity are permanently and inextricably bound up with those of other nations.

Protectionism as a cause flourished in a simpler world in which the U.S. traditionally tended to stand aloof from foreign entanglements. That world has changed, and so has its dream. President Kennedy gave words to the dream when, in his State of the Union message last January, he explained the long-range purpose of his trade bill and his foreign policy: “This is our guide for the present and our vision for the future—a free community of nations, independent but interdependent . . . one great family of man, outgrowing and transcending the hates and fears that rend our age.” Freer trade cannot bring such a world into being, but it is an indispensable step along the path.

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