Shades of Smoot-Hawley
An excellent commentary on Bloomberg.com today on the wave of protectionism spurred on not just by U.S. presidential candidates but by other rich countries. Columnist Michael Sesit points out likely and negative consequences of the fierce anti-trade sentiment — and threats:
Free trade’s demise might unleash a cocktail of stagflation, rising interest rates, a plunging dollar, squeezed corporate- profit margins and tumbling stock markets. World trade fell 70 percent two years after the enactment of the U.S. Smoot-Hawley Tariff Act of 1930.
Sesit notes that the primary rhetoric may be just that, but raises risks of widespread negativism about free trade among U.S. citizens:
The Obama-Clinton trade debate may just be political theater, destined to fade after the Democrats choose a candidate. Still, there’s a risk that it won’t die down. Protectionism is a catchy issue — blaming someone else for your problems always had its allure — with simplistic appeal to Americans, many of whom don’t understand the nuances of international economics.
It’s not just the “nuances” that need to be addressed. As the progressive Democratic group Third Way wrote in a paper last fall, “Why Lou Dobbs is winning,” countering anti-trade sentiment needs to go beyond economics to appeal to people’s values. That’s a campaign where the stakes are really high.