Posted on 08/17/2009 6:09:20 AM PDT by 1rudeboy
Willis Hawley and Reed Smoot thought they had a great idea.
Hawley chaired the House Ways and Means Committee. Smoot oversaw the Senate Finance Committee. Faced with a national economic meltdown, they brainstormed ways to jump-start the economy. Their solution was new tariffs.
The Smoot-Hawley Tariff Act of 1930 slapped duties on about 20,000 imports. Rather than spur consumption and production of American goods, it sparked an international trade war. By 1932, American exports to Europe were just one-third of what they had been in 1929. Worldwide trade fell two-thirds as other nations retaliated.
The protectionist measure protected nothing. Jobs evaporated. The stock market crash of 1929 deepened into the worldwide Great Depression that stretched to the outbreak of World War II.
Thankfully, Washington today isn't considering Smoot-Hawley II. But that doesn't mean there won't be trade skirmishes. Shots have already been exchanged.
The stimulus bill enacted earlier this year contained protectionist "Buy America" provisions that have angered our trading partners. The New York Times reports the action "has reopened the debate in Canada [our largest trading partner] about the value of the North American Free Trade Act and the trustworthiness of the United States as a trade partner." In June, Canada's mayors endorsed retaliatory measures against the U.S.
America was further discredited on trade when President Barack Obama signed Teamsters-backed legislation targeting trucks from Mexico that haul freight into the U.S. Mexico is our third largest trading partner. It promptly announced retaliatory tariffs on 90 American exports.
And now the administration is considering slapping tariffs on Chinese-made tires.
Anti-trade measures that undermine our prosperity are bad enough. Those that threaten both our prosperity and our security are worse. And that's happening with alarming regularity.
Congress continues to insert "Buy America" provisions into defense legislation that limits where the Pentagon can buy what it needs. These prohibitions are just wrongheaded.
It is hard to argue that defense companies need protection from foreign competition. Even in an era of recession, the U.S. defense sector exports far more than it imports. In 2008, imports amounted to about $2 billion. Exports were eight times greater, about $16 billion.
And it's not like the Pentagon is splurging on purchases from foreign suppliers. In 2007, for example, the Pentagon spent about $316 billion on contract work. Foreign companies got $18.6 billion of that business -- less than 6 percent.
In contrast, international defense programs where the U.S. shares development and production with trusted and dependable allies produce real benefits. Typically these programs reduce costs, spur innovation and -- perhaps most importantly -- promote interoperability (allowing allied militaries to work closely together because they share common equipment).
Certainly in matters of national security, not all trading partners are equal. America's closest allies have proved reliable sources for nearly all defense materials. Protectionist legislation that discriminates against defense cooperation with the countries that have fought side by side with us from Baghdad to Kabul makes no sense.
The real danger to the U.S. defense industrial base is not foreign competition. It is Pentagon budgets that are too anemic to buy the modern systems our military will need to protect us in the future.
Increasingly, procurement (buying stuff) accounts for less and less of the Pentagon budget. This year, about 64.5 percent of the budget will go to pay for operations, maintenance and personnel costs (like pay and health care).
Only about 31.4 percent goes to the "procurement" budget, and, of that money, only slightly more than half goes to actually buying new systems. With less money to buy weapons, defenses, vehicles and other equipment, the Pentagon "stretches out" its orders, buying smaller amounts over a longer period of time. In the end, the armed forces wind up spending more and working with less -- and older -- equipment.
Congress just doesn't get it. Last week, it rushed through legislation to spend up to $3 billion for "cash for clunkers." That $3 billion could have offset the entire missile defense cut in this year's defense budget and bought more than a half dozen F-22s. It would have saved highly skilled, good-paying American jobs and supported industries vital to our national security.
"Buy America" provisions that provoke retaliatory measures against U.S. foreign military sales are a double whammy to the defense sector. Instead of trying to buy off constituents with counterproductive protectionist measures, Congress should live up to its constitutional obligation to "provide for the common defense."
Except in their own districts, naturally.
Before 1914, the government was running on import export taxes and they were doing just fine.
Seriously, free trade is a good thing as long as currency manipulation and slave labor are not part of the equation.
Scratch the “Buff”, that was after WWII...DUH! Brain fart...!
Below is from George Washington’s Farewell Address!
On stable public credit.
“...cherish public credit.
One method of preserving it is to use it as sparingly
as possible... avoiding likewise the accumulation of
debt....it is essential that you...bear in mind, that
towards the payments of debts there must be Revenue,
that to have Revenue there must be taxes;
that no taxes can be devised, which are not...inconvenient
and unpleasant...”
Did you see this part? “Even in an era of recession, the U.S. defense sector exports far more than it imports. In 2008, imports amounted to about $2 billion. Exports were eight times greater, about $16 billion.”
“free trade is a good thing as long as “slave labor” isn’t involved.”
It is and it is devastating. When the greatest economy in the world can’t produce goods for its own people and has to rely on foreign imports and outsourcing to provide them, something smells. Also our exports look like mostly raw materials, which is the trademark of a “third world country”. Without jobs, no consumer. Without consumer, no recovery. Without recovery, bankruptcy. With Obama, guaranteed.
Any backup for this claim?
The trade situation and cost of living difference between the US and Europe is vastly different than between the US and the various Asian countries. Europeans have yearly incomes whereas many in Asian make less than $2000 annually. Many imports from the US to Asian countries are really just the raw materials for what they ship back to the US. It is just a net drain on the economy... Why not tariff those countries?
Well, that’s one way to curtail our raw material exports . . . .
The defense sector exported $16B of lead, last year.
'Buy America' is bad for national security
Huh?
I don't know how old James Jay Carafano is but I guess he missed that little thing that happened when Bush 41 was POTUS.
During 41's term, Japan's stock market and economy was in a free-fall and they approached Bush 41 (aka: the USA) for a loan to bail them out. But before he made a decision he was 'reminded' by Japan of what could happen if he refused. They said in effect,"Gee, it would be too bad if the USA needed spare or replacement parts for all the Avionics in their military airplanes." (1)Then, it just so happened that Bush 41 (the USA) did GIVE Japan the loan they 'requested' and needed to keep their economy afloat. But what Japan pulled was plain and simple extortion.
What Japan did there was no different than what Gangsters did during prohibition, 'reminding' speakeasy owners they 'should' keep buying their beer from them - or 'else'. So if a 'close ally' like Japan could and would extort the USA then anything is possible. So excuse me when I say this article is full of cra... off base.
Any and every little thing used by our Military should be made in the USA. End of conversation, period.
(1) This was also during the time when the USA was trying to get better (more fair/equal) trade agreements with Japan. Japan was dumping their products here way under cost, putting American companies out of business. At the same time Japan was imposing HUGH import tariffs on USA products shipped to Japan. Bush 41's Trade talks with Japan went nowhere. They held that Avionics Card over us.
More economists are coming to the conclusion that Smoot-Hawley didn’t change anything, it just formalized the shutdown of world trade that was happening anyway.
Right now, the Baltic Dry Index of cargo shipping has briefly come off its rock bottom lows. Prices for cargo ship rentals so low they wouldn’t even cover the lubricating oil the ships need to function. This happened naturally, no trade tariffs were needed.
So any trade tariffs right now would be like putting a huge tax on unicorn imports. Feel free to do so.
However, “Buy American” is a different prospect indeed. America has outsourced vast amounts of its economy, figuring to make things that could still be sold in America. But if the trade is cut off, “Buy American” is no longer an option. America *has* to rebuild all those industries it outsourced, or do without.
And rebuilding its industries is the key to finally rising up out of this Obama depression.
I really don’t know what Carafano was doing during the Bush 41 Administration. He might have been teaching at West Point or the Naval War College.
But then who would be left on FR to rile-up the Bolsheviks? [hint]
We loaned Japan money? When? How much?
You are wrong of course. The government was within hours of bankruptcy when JP Morgan called on the President and bailed him out. He entered a consortium with the Rothchilds that provided loans that saved us from a financial debacle.
a) Yes,
b) During Bush 41's term when Japan's economy was in a free-fall
c) Can't recall.The amount wasn't the issue anyway, its that it was extorted under a threat of withholding Avionics for our military.
This was pre Internet days. The MSM reported what they wanted and for how long. It was in the news for a couple days at most. (They were more interested in Bush 41 puking in the lap of Japans Prime Minister at that State dinner, or making him out to be a nitwit like with that Price Scanner).
A google search of 'Japan Economy Collapse', or 'Japan Stock Market Crash', 'US loan to Japan' should return the info.
Sounds like you made it up.
The MSM reported what they wanted and for how long. It was in the news for a couple days at most.
Right. They wouldn't use it to pound on Bush. LOL!
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