A guy I worked with years ago used to call me “Reed Smoot,” probably just because it sounded like a fun corruption of my name. It had the useful effect, though, of prompting me to learn something about the real Reed Smoot’s most infamous act — namely, his sponsorship in the U.S. Senate of a bill that raised tariffs on more than 20,000 imported goods. It was one of the dumbest pieces of legislation in the 20th century.
The so-called Smoot-Hawley Tariff, signed into law by President Herbert Hoover in 1930, didn’t cause the Great Depression, but it arguably worsened it. Canada, our country’s most loyal trading partner, retaliated by imposing new tariffs on U.S. imports and forging closer economic ties with Britain, which depressed American export income. Then those countries joined France and Germany to develop stronger multilateral ties, as the United States withdrew from the sphere of cooperation that trade encourages. International commerce contracted, and the global slide into economic ruin intensified.
I offer that brief explanation because these days politicians in both major parties warn about repeating the mistakes of Smoot-Hawley without reminding citizens of what they were. So here’s the lesson: People who claim that restricting international trade will bring prosperity to America, as my namesake Reed Smoot did, are snake oil salesmen.
“America First” is a stirring call to action (if you ignore the slogan’s use by the Ku Klux Klan in the 1920s), but Americans’ best interests aren’t served by either isolationism or policies that ignore how other nations will react. As Smoot-Hawley should have taught us, protectionism will prompt other nations to behave similarly — Deutschland zuerst! La France en premier! — making us all smaller as we withdraw into our national silos.
Of course, you can’t beat the vision of dormant American factories firing up in order to meet domestic demand, replacing products that we have been importing from other nations. Here in upstate New York, we would welcome the job growth that President Donald Trump promises will follow a trade war, which he says “will be easy to win.” We need the jobs.
A new report from John Bacheller, who before his retirement led policy and research for Empire State Development, New York’s economic development agency, notes that job growth everywhere upstate has lagged the nation since the 1990s — in some cases dramatically. Private sector jobs have grown nationally by more than 48 percent since 1990, but the growth in the Capital Region has been only 27.5 percent. Elsewhere, it has been even worse: In Buffalo, jobs grew only 7.9 percent; in Utica-Rome, just 3.9 percent. We see the results: There are too few jobs to maintain the economic vitality we enjoyed decades ago.
But it’s simplistic to blame foreign imports. Rochester-based Eastman Kodak didn’t shrink by 96 percent and slide to bankruptcy from its perch as one of the world’s top five companies because Fujifilm was cheaper. It happened because Kodak didn’t quickly enough embrace the digital technology that overtook photography. Mighty Kodak was felled by tech, not trade.
Sure, it’s tempting to blame foreigners — even our pals in Canada — for the millions of American factory jobs that have disappeared over the last three decades. But American manufacturing really has been a victim of its own success: Automation has increased productivity, meaning that fewer workers are required to produce more output.
Michael Hicks, an economics professor at Ball State University, has noted that the average American autoworker in 1990 made 13 cars a year, but 20 years later the average autoworker in the U.S. was making 18 cars a year. “So we don’t need as many autoworkers as we did a generation and a half ago,” he said, in an interview with NPR.
In fact, U.S. manufacturing grew nearly fivefold from 1960 to 2015. During that time, factory jobs declined and imports increased. But the latter didn’t cause the former.
Yet we have a new national policy that seems designed to provoke our greatest allies to lash back at American farmers and producers, and our biggest competitor on the world stage, China, to take advantage of America’s withdrawal from global trade by forging its own deals with nations we have spurned.
I’m no economist, but I’m persuaded by those who work for the nonpartisan Congressional Budget Office, who concluded in 2016 that trade “can boost economic output and workers’ average real wage” and yield lower prices for consumers.
You’d think we would have learned that back when old Reed Smoot was around. Speaking of lessons, the tariff begat ignominy for Smoot. He lost his Senate seat two years later.
— Rex Smith is editor of the Albany Times Union.