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OpinionOctober 10, 1993

As we currently ponder the pros and cons of NAFTA, we might keep in mind the other great trade debate of the 20th century, the Smoot-Hawley Tariff Act of 1930. As the Depression took hold in our country, large manufacturers became increasingly apprehensive that lower cost foreign goods would put them out of business. ...

Tom Eagleton

As we currently ponder the pros and cons of NAFTA, we might keep in mind the other great trade debate of the 20th century, the Smoot-Hawley Tariff Act of 1930. As the Depression took hold in our country, large manufacturers became increasingly apprehensive that lower cost foreign goods would put them out of business. Their spokesman was Senator Joseph Grundy, R.-Pa., who had served as President of the Pennsylvania Manufacturers Association before coming to the Senate. His argument was that a higher tariff would simply "equalize" things or, in today's jargon, "creating a level playing field." In reality, as he whispered to Utah's powerful Republican Senator Reed Smoot, "I'm not for equalizing, I'm for excluding."

President Herbert Hoover was not, in his own mind, a narrow extremist like Grundy or Smoot. He thought of himself as a modern man with a broad intellect. He believed he could "scientifically apply" tariffs by careful calculation of comparative production and shipment costs.

As the Congressional debate began, 1,000 economists from 179 colleges and universities from 46 states opposed Smoot-Hawley. "The world economic structure is so closely interconnected that no unilateral major changes can be undertaken without seriously affecting the entire structure," said the economists. They predicted with ominous accuracy that the other nations would retaliate by imposing higher tariffs of their own, with the result that international commerce would shrink for all nations.

But the Congressional protectionists disagreed. As one senator put it, "Free trade economists seem to be more concerned with the prosperity of the foreigners than with the welfare and jobs of our own workers." Another senator said, "We can't compete against the low wages in Czechoslovakia. Either our wages will have to go down or our market will be captured by Czech goods."

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The AFL spokesman didn't put much faith in the economists as well. "They do not understand lower wage levels and competition from countries where standards are lower than ours."

Back then, the Republican Party was protectionist; the Democratic Party was for free trade. The vote went down to the wire 44 (39R and 5D) yes; 42 (32D and 10R) no. Hoover signed his "scientific" trade bill. Smoot-Hawley lived on in economic infamy. The Great Depression got greater.

"Probably nothing was so damaging to Hoover's reputation during his first two years in the presidency as his handling of the tariff," writes historian Harris Warren. "The president's signature on the tariff bill was to be more severely criticized than any other single act of his administration," say historians Edgar Robinson and Vaughn Bornet.

To be sure, NAFTA cannot equate to Smoot-Hawley. The substance, scope and timing are significantly different. But if the fundamentals of international economics would have made it beneficial to expand world trade in the `30s, why aren't they beneficial for expanding trade in our hemisphere in the `90s?

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