Former Delaware governor Pete DuPont has an excellent piece in The Wall Street Journal on the dangers of protectionism. DuPont notes that the last major exercise in American protectionism was the Smoot-Hawley Tariff, a bill that created a global trade meltdown and was one of the major contributing factors to the Great Depression.
The fact remains that we all benefit from outsourcing. The myth of protectionism is that the hand of government can stop the creative destruction of a changing economy. Attempts to do so invariably fail. One needs only look to recent history to see why, as DuPont finds:
President Bush’s steel tariffs saved the jobs of 5000 U.S. steel workers, but caused higher steel prices that eliminated 23,000 jobs in steel-consuming industries. Should similar tariffs be imposed on other product imports?
For those who argue that outsourcing hurts the poor, would they care to raise the cost of consumer goods in order to protect a handful of textile jobs? When a family on the poverty line that can barely make ends meet as it is suddenly sees the costs of clothes for their children jump by 50%, where are they going to turn? Should millions be punished in order to protect one specific group? The correct answer is clearly no.
The second major myth of protectionism is that jobs will stay in the US if protectionist measures are passed. If a computer company can’t afford to pay American workers $15/hour to do tech support they aren’t going to suddenly be able to do so because the government tells them to. Instead, they’ll simply stop operating tech support at all. Those jobs aren’t going to come back regardless of what the government does – and invariably the costs of protectionism outweigh the benefits.
There’s something to be said about buying American, so long as it is an individual choice. If people want to pay more for an American product, then they are more than welcome to do so. However, using the power of government to coerce someone into buying American products won’t save jobs, it will cost them. When the economy is in a tenous but growing recovery, the last thing we need is a trade policy that would cost millions of Americans their jobs on the myth that protectionism is a good idea. It was wrong with the Smoot-Hawley Tariff and it is just as wrong now.