Smoot–Hawley Tariff Act
The Smoot–Hawley Tariff or Hawley–Smoot Tariff (P.L. 71-361, officially named, the Tariff Act of 1930) was an act signed into law on June 17, 1930, that raised U.S. tariffs on over 20,000 imported goods to record levels.
The main goal was to protect American jobs and farmers from foreign competition, especially after the global economy entered the first stages of the Great Depression in late 1929. In 1922, Congress had passed the Fordney-McCumber tariff act, which had increased tariffs. Reed Smoot in 1929 championed yet another tariff increase, which became the Smoot-Hawley Tariff Bill.
In his memoirs, Smoot made it abundantly clear: ...
... What did Smoot really think, about this dynamic between Production vs Purchasing Power ???
I guess you'll have to take the leap, and grab a cup of coffee first, okay ...
In his memoirs, Smoot made it abundantly clear:
"The world is paying for its ruthless destruction of life and property in the World War and for its failure to adjust purchasing power to productive capacity during the industrial revolution of the decade following the war."
Smoot was a Republican from Utah and chairman of the Senate Finance Committee. Willis C. Hawley, a Republican from Oregon, was chairman of the House Ways and Means Committee.
Willis C. Hawley (left) and Reed Smoot in April 1929, shortly before the Smoot-Hawley Tariff Act passed the House of Representatives.
Geesh ... a couple of Republicans -- actually enacting Tariffs to Protect American Jobs -- who knew?
PS. the way I read it, Smoot was arguing for 'Wages to keep pace, with national Productive Capacity'. Smart man.
Wall Street Journal, Opinion:
Douglas A. Irwin,
professor of economics at Dartmouth College;
Goodbye, Free Trade?
High tariffs and currency wars cost us big in the 1930s. We can avoid making the same mistakes again.
Oct 09, 2010
Smoot-Hawley has become a reliable punch line because it is so regularly—and hyperbolically—invoked in the debate over international trade, a debate that has reignited recently as America's jobless recovery drags on. Late last month, the House of Representatives passed legislation aimed at imposing trade sanctions against China unless it allows its currency to appreciate, thus diminishing its export advantage.
To exacerbate matters, American politicians of both parties, facing midterm elections in just a month, have found a useful talking point in charges of unfair trade. A newly released Wall Street Journal/NBC News poll found that 53% of the American public now believes that free-trade agreements have hurt the U.S., up from 46% three years ago and 32% in 1999.
U.S. Trade Deficit with China
By Kimberly Amadeo, About.com Guide
Why Is There a U.S. Trade Deficit with China?
China is able to produce low-cost goods that Americans want. Most economists agree that China's competitive pricing is a result of two factors:
1. A lower standard of living, which allows them to pay lower wages to workers.
2. An exchange rate that is partially set to be always priced lower than the dollar.
How Does the U.S. Trade Deficit with China Affect the U.S. Economy?
As China buys U.S. Treasuries to support the value of the dollar, and keep its exports cheap, it becomes a large lender to the U.S. Government. In November 2009, China owned $789 billion in U.S. Treasuries, 33% of the total $2.4 trillion outstanding. This makes it the largest owner. Many are concerned that it gives China political leverage over U.S. fiscal policy, since it could theoretically call in its loan. (Source: U.S. Treasury, Major Foreign Holdings of Treasury Securities)
By buying Treasuries, China helped keep U.S. interest rates low. Until the Subprime Mortgage Crisis, this helped fuel the U.S. housing boom. If China were to stop buying Treasuries, interest rates would rise, delaying any recovery from the recession.This isn't in China's best interests, as U.S. shoppers would buy fewer Chinese exports.
PA Senate candidates split on China trade bill
Associated Press – Oct 06, 2010
Toomey's Democratic counterpart, U.S. Rep. Joe Sestak, voted for the measure. It passed the House last week, 348-79, and was sent to the Senate.
It would allow the U.S. to seek sanctions against China and other nations that gain trade advantages by manipulating their currency.
Supporters say it would bring back some of the American jobs lost to China's artificially undervalued currency that makes Chinese products cheaper to buy.
Toomey says the bill risks starting a trade war that would make it costlier to export goods and buy imports.
Pat Toomey and Joe Sestak, battling it out for a US Senate seat in Pennsylvania.
Sestak: I'm for U.S., Toomey's for China
The Democrat says his GOP opponent favors policies that ship jobs overseas.
By Daniel Patrick Sheehan -- October 08, 2010
Sestak — trailing by 7 percentage points, according to the latest Morning Call/Muhlenberg College poll — drew applause from supporters as he detailed Toomey's record on policies he said have cost Pennsylvania thousands of jobs through outsourcing.
Washington Post, Opinion:
C. Fred Bergsten:
Director of the Peterson Institute for International Economics;
Topic A: What to do about China's currency?
October 10, 2010
China's massive intervention in the foreign exchange markets has produced an undervalued currency that subsidizes all Chinese exports by at least 20 percent and protects all Chinese imports by at least 20 percent. The U.S. global trade deficit is $50 billion to $100 billion higher and perhaps 500,000 good jobs in this country are displaced as a result. Moreover, China's actions have unleashed worldwide currency conflicts that threaten to replicate the spiral of competitive devaluations that deepened the Great Depression in the 1930s.
But three additional measures are needed to persuade China to let its currency rise by 20 to 25 percent over the next two to three years.
Geithner must label China a "currency manipulator" in his next report to Congress due on Oct. 15;
the United States cannot mobilize international support on the issue unless it is willing to indict China itself. The United States and as many allies as possible should seek authority from the World Trade Organization to impose restrictions on all imports from China until it eliminates the misalignment.
Most important, the United States should counter China's manipulation with countervailing currency intervention of its own: We should buy yuan-denominated assets to offset China's purchases of dollars and henceforth directly neutralize any further distortion of our exchange rate.
About the Institute
The Peter G. Peterson Institute for International Economics is a private, nonprofit, nonpartisan research institution devoted to the study of international economic policy. Since 1981 the Institute has provided timely and objective analysis of, and concrete solutions to, a wide range of international economic problems. It is one of the very few economics think tanks that are widely regarded as "nonpartisan" by the press and "neutral" by the US Congress, its research staff is cited by the quality media more than that of any other such institution, and it tied for Top Think Tank in the World for 2008 in the first comprehensive survey of over 5,000 such institutions.
Washington Post, Opinion:
Sander M. Levin,
Chairman, House Ways and Means Committee:
Topic A: What to do about China's currency?
October 10, 2010
House Democrats took major legislative action because China's persistent currency manipulation -- part of its overall economic strategy -- was costing American jobs by making China's goods cheaper and U.S. goods more expensive. China promised to adopt currency flexibility, but as too often has been the case, it has not implemented this promise to fulfill international obligations. And there has not been effective multilateral action on what is increasingly a global problem.
The House legislation replaces rhetoric with action. It is crafted carefully to be consistent with our World Trade Organization obligations.
It would provide meaningful relief to U.S. businesses and workers by allowing duties to be imposed to offset the effects of an undervalued currency.
To thrive, international trade must have rules of competition.
Americans need their elected representatives to stand up for them and hold our trading partners accountable to the rule of law.
Through this action, the House sent a message that China's currency manipulation, a unilateral and protectionist measure, cannot stand. We must embark on a comprehensive strategy, including multilateral action, to enforce the rules of trade and allow our businesses and workers to compete and win in the international marketplace.
And this Diarist's off-the-cuff Observations and Opinions, FWIW:
I suppose much depends on, Who is signing agreements for What?
and Who will be hired to produce those Whats ...
and Who will be capable of Purchasing those Products,
the critical outputs of Global Trade?
If it is indeed, now the Pandora-reality, that we live in a Flat World, as we were told and sold, all throughout the Last Decade --
Everyone should be empowered to buy Everything, at the least Expensive Price, right?
Isn't that our Free-Marketeer, Eminent-domain-given right,
granted us by the grandest of intentions of the WTO Flat Worlders?
SO What Happened?
Perhaps the grand plans of the Multi-Nationals ... were Wrong in their basic assumptions ???
The WTO's Bill of Wrongs
What every happened to these self-obvious Progressive principles:
-- Consumer Demand is driven from the Bottom up, and are ultimately based on a good living wage.
-- We live on a Planet with limited Resources, from which ALL our wealth is derived.
-- Human Capital has its own value outside of our sterile Profit/Loss Equations.
-- For Trade to Work it must be Fairly applied, on a level playing field, with neutral Umpires and Referees (as we do in all our Sporting events).
-- Maximizing Profits is not the end-all, be-all of Human Existence -- at least it shouldn't be, if Human Society is to reach our individual ultimate Potentials.
Has this grand experiment in "Flat World - Free Trade", with No Barriers, No Limits,
Has it failed terribly, or succeeded wonderfully ???
I suppose much depends on, 'Who is signing for Who?'
on Who dares to speak for Whom.
It is really a shame that the Tea Party, gets to reap the benefits,
of the wide-spread Angst of the average Worker in America, don't ya think?
These topics of Trade and Tariffs, DO take a bit more serious thought, than the average "Partier" is likely to bring to the table.
Anyways, Thanks for reading. I trust you learned something (hopefully).
Now if only we could pivot off of this rare moment of National Worker Angst and Anger ..
IF Only ...