draik said:
This is a nice quote that I read somewhere:
trade protectionism is wrong at any time, but certainly during an economic downturn for a host of reasons.
We can look to recent history when Bush took a protectionist moment and imposed tarrifs against steel imports in the early 2000s. While approximately 180,000 steel jobs were protected, the reciprocal actions resulted in over 200,000 jobs lost as a result.
We must not forget that in 2007 and 2008, the highlight of our economy was our exports as our manufacturers were booming with requests from foreign demand. The rise for our exports came as a direct result of trade liberalization, free trade, and a slumping dollar. This acted as a force multiplier for our goods and services because the trade liberalization that opened up markets for our goods made them that much more desirable due to the cheap price. In fact, in 2007, every country we had a free trade agreement with resulted in a TRADE SURPLUS for our nation.
Imposing barriers to trade will indeed result in trade reciprocity and nations will close their markets to our goods. We must remember that the very definition of an export means that these are goods and services that Americans are not buying or do not want. Hence, when foreign markets become closed to our exports, exporting manufacturers and other businesses will not be able to recoup those sales losses from American consumers. Companies like GE and Caterpillar DEPEND on exports, over 60% of their sales come from overseas. Thus, any protectionist actions taken by our government will hurt many other companies.
But we must also take into account the consumer. While buying local is a wonderful concept to those who can afford it, the fact of the matter is that those with lower disposable incomes shop at Dollar Stores and Wal-Mart to stretch their dollars further and save money. The reason why Wal-Mart and Dollar stores can charge so little is because they are importing cheaper goods from overseas. But it isn't just the consumers and final destination retailiers that benefit from trade liberalization, it's all the stops in-between. Our ports, supply chain distribution companies, import/export companies, marketers, etc.. all have a stake in delivering goods and reap the benefits of good trade practices. In addition, many of the so-called "foreign goods" are actually manufactured by American companies located overseas. Unfortunately, those realities are not measured by GDP, but they ARE measured by GNP.
From our retailers, transportation systems, ports, exports, to consumers, we all benefit from trade liberalization. Putting up barriers to trade during a recession is folly, pure folly, and Smoot-Hawley ought to remind us of that reality.
Unfortunately, the "stimulus" bill now making its way through congress has protectionist language, which will hurt jobs in other countries, such as Mexico and Canada. They will respond, by putting up barriers and the recession will worsen.
Welcome to the 1930s, FDR, and a looming Depression. We have not learned from history, so we'll have to repeat those lessons again.
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