protectionism, many writers focus on a single tariff number—rnthe average duty on dutiable imports in 1932. This figure wasrnindeed 59.1 percent, and it was in fact one of the higher dutiablernrates in American history. It was not the highest, however.rnIn 1830 under the Tariff of Abominations, dutiable ratesrnpeaked at 61.69 percent.rnLike supermarket tabloids headlining the latest exploits ofrnMadonna or Lady Di, writers who magnify a single photo orrnstatistic frequently miss the truly significant story. Congress didrnnot enact this 59.1 percent duty in 1930 as part of the Smoot-rnHawley legislation. This duty resulted later, when decliningrnprices and tax increases on commodity imports in 1932 ratchetedrnup effective tariff levels.rnThis critical point warrants further explanation. Like previousrntariffs, the 1930 act relied extensively on specific duties.rnNearly half of Smoot-Hawley imports were taxed at specificrnrates—meaning at a fixed amount per quantity, like 20 centsrnper pound. Thus, as prices plunged during the Great Depression,rnthe percentage equivalent of such specific duties soared.rnA 20-cent duty on an item worth $1.00 effectively becomes arn40-percent duty if the price falls to 50 cents per unit. Hadrnprices remained constant, the U.S. Tariff Commission calculatedrnthat the Smoot-Hawley rates on dutiable items wouldrnhave averaged 41.6 percent—certainly not a prohibitive tariff byrnhistorical standards. In fact, in 51 of the 94 years from 1821 torn1914 the average rate on dutiable imports exceeded thatrnamount.rnThus, the two Republican legislators who coauthored thern1930 tariff—Senator Reed Smoot of Utah and CongressmanrnWillis Hawley of Oregon—achieved notoriety because of circumstancesrnbeyond their control. Had Congress not approvedrna tariff bill in 1930, falling Depression-era prices would havernratcheted up existing duties under the 1922 tariff. Eager to discreditrnRoss Perot in any way possible, it is not difficult to imaginernVice President Gore combing the Library of Congress for arnpicture of two other obscure congressional leaders: RepresentativernJoseph Fordney (R-MI) and Senator Porter McCumberrn(R-ND), authors of the 1922 tariff.rnSmoot-Hawley bashers usually overlook another key point.rnThe notorious 59.1-percent rate applied only to one-third of totalrnimports in 1932. The 1930 act slightly expanded the fiee listrnso that two-thirds (66.8 percent) of U.S. imports, by value, enteredrnduty-free. Smoot-Hawley permitted a larger percentagernof imports to enter the United States duty-free than before orrnafter, except in wartime. In 1991, for example, only 35 percentrnof U.S. imports entered duty-free, about the same percentagernas in 1970 or 1890. Perhaps this is the real secret. During extraordinarilyrndifficult economic times. Congress succeeded inrnwriting a tariff schedule that actually increased the share ofrnfreely traded imports, while raising rates on some politicallyrnsensitive items to pre-World War I levels.rnWhat about the claim that protectionist Smoot-Hawleyrnspooked the New York stock market and contributed to thernGreat Crash? This is preposterous. President Hoover andrnCongress completed their work on the tariff in June 1930,rnnine months after the stock market break. Elementary logicrnsuggests that an event in 1930 cannot cause an event in 1929.rnInterestingly, the business community did not fear higher protectiverntariffs. They feared gridlock and uncertainty. The Octoberrn1929 stock collapse came after a loose coalition of progressivernRepublicans and Southern Democrats seized control ofrnthe tariff bill, resulting in congressional deadlock. The stockrnmarket recovered during the spring of 1930 when PresidentrnHoover’s Senate allies succeeded in breaking the stalemate andrncompleting the Smoot-Hawley bill.rny ^ — y ^ f Smoot, Hoover,andrn^^/ other participantsrnf^^y could comment onrnthe controversial North AmericanrnFree Trade Agreement, they mightrnoffer an unsettling thought: America’srnpresent economic problems result inrnsignificant part from two generationsrnof misplaced trade priorities.rnDid Smoot-Hawley actually worsen the Depression, as AlrnGore claims? Modern economic historians reject the VicernPresident’s claim. Peter Temin of MIT states that the contradictoryrnargument “fails on both theoretical and historicalrngrounds.” If higher U.S. duties had reduced import access tornthe U.S. market, dutiable imports should have fallen morernrapidly than duty-free imports. They did not. From 1929 torn1931, as the U.S. entered the Depression, imports of dutiablernand nondutiable goods both fell by the same amount—33rnpercent.rnTo demonstrate that Smoot-Hawley harmed world tradernand deepened the Depression, critics must prove thatrnthe 1930 tariff provoked substantial foreign retaliation againstrnU.S. exports. Certainly a number of foreign governments didrnseek to influence the congressional tariff-writing process inrn1930 with talk of protests and reprisals. But declassified StaternDepartment records, available in the archives to any interestedrnperson, contain little evidence of either formal protests orrnmeaningful retaliation. Many textbook writers assert that 34rncountries protested Smoot-Hawley. In fact all but three or fourrnsuch communications were routine. Unable to testify beforernCongress, foreign businesses and importers simply turned torndiplomatic channels to communicate technical concerns tornCongress. In 1929-1930, the State Department served as arnmailman for foreign interests.rnCompelling evidence that foreign governments avoided disruptivernretaliation emerges in the State Department’s internalrnrecords. Asked to assess foreign reactions to Smoot-Hawley, thernState Department solicited information from overseas posts arnyear after the tariff act took effect. Summarizing responses, thernState Department reported: “With the exception of discriminationsrnin France, the extent of outright discriminations againstrnAmerican commerce is very slight.” The official review concluded:rn”By far the largest number of countries do not discriminaternagainst the commerce of the United States in anyrnway.”rnIf France was the most flagrant example of discrimination,rnMARCH 1994/25rnrnrn
January 1975April 21, 2022By The Archive
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