Getting to the Yolk of the Argument on Trade

By October 31, 2008Trade

WTO Director General Pascal Lamy’s speech on the financial crisis and trade (see here and here) provides the opportunity to cite a case of how the Smoot-Hawley tariffs did damage to one specific segment of the economy, in this case, egg producers. Lamy provides the big picture, and Don Boudreaux at Cafe Hayek focuses in, a post from June 17, 2007:

Protectionism doesn’t achieve even its own nonsense goal of increasing  exports.  A revealing, specific example involves eggs.  Smoot-Hawley raised the tariff on egg imports into the U.S. from eight cents to ten cents per dozen.  This higher tariff caused eggs imports from Canada to fall by 40 percent.  In response, Canadian authorities increased the tariff on U.S. eggs exported to Canada; this tariff went from three cents per dozen to ten cents per dozen.  The result was that American eggs exports to Canada fell by 98 percent – from 11 million annually just before Smoot-Hawley to a mere 200,000.   (I found this tidbit in Jeffry Friedan’s 2006 book Globalization.)

Tariffs on imports to the United States caused related exports from the United States to plunge 98 percent! Astonishing. Instructive.

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