CNN/Money has a good backgrounder on the rise of economic protectionist sentiments in the United States and why they’re bad news for the overall economy. Protectionism is bad policy at any time, in the middle of an economic downturn it’s suicide (see the Smoot-Hawley Tariffs for an example of this).
Protectionism is based on the lie that the government can dictate where jobs go. The assumption is that if the government tells businesses that they can’t export jobs, that those jobs will stay in the United States and they won’t be lost.
Except the fact is that for that to work, someone else has to lose their job. If a company must reduce costs, they can’t keep the same number of jobs – and in the end, those jobs that would have been imported will simply go away.
That produces even more collateral economic damage in its wake – not only have those jobs disppeared, but those who depend on the products or services created by those jobs are now out of a job as well. After protectionism is enacted, you end up losing more jobs than you would have otherwise.
That is exactly what happened with steel tariffs:
What’s more, the Bush administration’s recent experiment in protectionism, a steel tariff imposed in March 2002, has had only mixed results at best. It may have helped steel producers in Pennsylvania and West Virginia — states with critical electoral votes for Bush’s re-election effort — but U.S. steel users say they have suffered from it, resulting in thousands of additional job cuts.
“The government should have learned its lesson from steel tariffs — they were a big disaster,” said Matthew Ellis, an economist at Wachovia Securities. “I don’t think these protectionist measures will be passed.”
Unfortunately, the Democrats have abandoned the moderate and sensible trade policies of Bill Clinton. With Howard Dean and others wanting to gut NAFTA, pull out of the WTO, and take our trade policy back to the worst mistakes of the Great Depression. For all the cries against US “unilateralism” in foreign policy, the Democrats seem anxious to enact a go-it-alone trade policy that will destroy the US economy and cost millions of jobs. With the economy in the middle of a recovery, such a policy would be devastating – which is why those who would enact such a disastrous plan should not be elected to office.