From an editorial in today’s Washington Post, “Beyond Beef“:
THE COLLAPSE of the Doha Round of global tariff-reduction negotiations means that free trade is likely to advance, if at all, only through bilateral and regional agreements. These are not ideal, since they risk fragmenting the world into rival trading blocs, but they are better than no liberalization at all. And the economic case for the U.S.-Korea Free Trade Agreement in particular, in which both Washington and Seoul agreed to reduce tariffs on a host of products, remains strong. The biggest such proposed pact since the 1994 North American Free Trade Agreement, the deal would substantially increase American producers’ access to South Korea’s dynamic, $1.2 trillion economy.
Giving in to protectionism. In Herbert Hoover‘s time, Sen. Reed Smoot and Rep. W.C. Hawley proposed a tariff that was to raise effective duties by as much as half. More than a thousand economists signed an open letter warning that the duties would “raise the cost of living and injure the great majority of our citizens.”
But Hoover’s Republican Party didn’t much care. In its 1928 platform, the GOP had pledged to “reaffirm our belief in the protective tariff.” Ambivalent, Hoover signed the bill. An irate Canada and many other nations retaliated. At a time when the United States was begging for foreign markets, it lost them. The selfish signal discouraged an already unstable Europe.
Today, international trade claims a sizable share of our economy. Bilateral free-trade agreements with Colombia or Panama are good insurance — cheap steps that might prevent an expensive loss, that of the Western Hemisphere to Venezuela’s Hugo Chávez.
Yet again, one party — the Democrats, this time — is cavalier. House Speaker Nancy Pelosi is blocking passage of these bilateral agreements. And another ambivalent politician — Sen. Barack Obama — has sent mixed messages to Canada about just how much he wants to roll back the North American Free Trade Agreement.
Shlaes is author of “The Forgotten Man,” a good book on the mythology of FDR and the Great Depression.
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