The Skeptical Liberal: 07/29/2007 - 08/05/2007

The Skeptical Liberal

How can we live together in peace, prosperity, and harmony, while retaining our liberties as autonomous individuals who can, and must, create our own values? -- J.M. Buchanan


Smoot-Hawley and the Club for Growth petition

Max Sawicky (MaxSpeak! see also Brad DeLong's website) has objected to a claim included with the Club for Growth petition that I posted earlier and acknowledged having signed. Two comments regarding Max’s objection:

a. The original form of the petition which I received made no reference to the link that theWSJ ad drew between the current petition to stop punitive protectionist tariffs against China and the Smoot-Hawley tariff act of 1930. I added my signature at that time for the reason that several responders to Max have already made: any defense of freer trade is welcome by me, whether I agree with everything the organization stands for. Arnold Kling makes this point best on EconLog. The Smoot-Hawley connection was a later addition, and not integral to the petition itself.

b. One of the reasons why some have jumped on the Smoot-Hawley linkage is because the impact of the 1930 act is a topic in which the academic debate diverges from popular opinion. I’ll come clean first: my reading of the economic history is that it is difficult to conclude unambiguously that the tariff act significantly damaged the US economy directly. However, I am a Canadian as well as an American, and find persuasive the argument that the Canadian retaliatory tariff decisions following the Conservative election victory in 1930 hurt the American economy. Were these "indirect" hurts from lost trade possibilities enough to say that Smoot-Hawley definitely hurt the American economy? I know Barry Eichengreen doesn’t buy the “retaliatory tariff” indirect impact argument, but it deserves more consideration. See “Trade Wars” by McDonald, O’Brien, and Callahan in the Journal of Economic History, December 1997 for more on the impact of Canada’s tariffs on the US in the early 1930s. And, by the way, Canada remains the US’ largest trading partner!

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Economists ask Congress to set aside protectionist sentiments

Over 1,000 economists put their names to the following petition. A full-page ad ran in today's Wall Street Journal, along with an editorial by Pat Toomey, the president of the Club for Growth (sponsors of the petition). I am one of the signatories. The actual number of signatories was 1,028: the same number that signed a petition asking Hoover to veto the Smoot-Hawley tariff in 1930.

    We, the undersigned, have serious concerns about the recent protectionist sentiments coming from Congress, especially with regards to China.

    By the end of this year, China will most likely be the United States' second largest trading partner. Over the past six years, total trade between the two countries has soared, growing from $116 billion in 2000 to almost $343 billion in 2006. That's an average growth rate of almost 20% a year.

    This marvelous growth has led to more affordable goods, higher productivity, strong job growth, and a higher standard of living for both countries. These economic benefits were made possible in large part because both China and the United States embraced freer trade.

    As economists, we understand the vital and beneficial role that free trade plays in the world economy. Conversely, we believe that barriers to free trade destroy wealth and benefit no one in the long run. Because of these fundamental economic principles, we sign this letter to advise Congress against imposing retaliatory trade measures against China.

    There is no foundation in economics that supports punitive tariffs. China currently supplies American consumers with inexpensive goods and low-interest rate loans. Retaliatory tariffs on China are tantamount to taxing ourselves as a punishment. Worse, such a move will likely encourage China to impose its own tariffs, increasing the possibility of a futile and harmful trade war. American consumers and businesses would pay the price for this senseless war through higher prices, worse jobs, and reduced economic growth.

    We urge Congress to discard any plans for increased protectionism, and instead urge lawmakers to work towards fostering stronger global economic ties through free trade.


One indication of my argument about Canada's HealthCare

Doctors say private health care could co-exist with public health care in Canada, and that it would strengthen the system.

Article is from the Globe & Mail.