Many economists and historians believe the Smoot-Hawley Act of 1930 – which imposed high tariffs on thousands of foreign imports – helped deepen the Great Depression.
That history bears on Barack Obama’s reported plan to nominate Gary Locke as secretary of the Commerce Department.
The former Washington governor could prove an ideal choice, if he stands up to the powerful Democratic constituencies pushing to protect U.S. industries from foreign competition.
Many Democratic lawmakers, under pressure from unions, are hostile to free trade agreements and unrestricted trade in general.
Free trade suffers from a visibility problem. When an American factory is closed down and its work sent to Mexico, the hurt is obvious and easy to package for the nightly news. Trade pacts – like the much-revised North American Free Trade Agreement – get blamed.
In the meantime, though, free trade is broadly expanding American payrolls and bringing down the price of consumer goods. Those benefits turn up only in statistics, though – not in dramatic profiles of laid-off factory workers. Most economists argue that trade produces far more jobs than it eliminates, but the incremental hiring doesn’t make good camera fodder.
Obama is too smart not to understand this. He made that clear on his recent trip to Canada, where he warned against a “strong impulse” toward protectionism – and said he’s in no hurry to renegotiate NAFTA, one of his campaign promises.
Locke is likewise aware of the benefits of free trade. Washington is the most trade-dependent economy in the country, and its exporters – Microsoft and Boeing among thenm – have pumped fortunes into the state and support hundreds of thousands of jobs. The former governor would do the United States a great service by defending free trade against the powerful interests that want to dismantle it.
The memory of Smoot-Hawley needs dusting off. It was enacted in response to the economic catastrophe that began in 1929; the idea was to help struggling U.S. companies stay on their feet by shutting out competing imports.
Unfortunately, America’s trade partners had the same idea. They also passed sweeping trade restrictions – sometimes in retaliation for Smoot-Hawley. The resulting plunge in commerce deepened the Depression – and showed that protectionism is precisely the wrong response to the kind of crisis the world is in now.
Locke knows this. Obama’s choice of him as commerce secretary would offer some reassurance that free trade will continue to be a priority of the U.S. government.
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