Protectionism

(Noun) Shielding domestic industries from foreign competition by imposing tariffs and/or erecting other barriers to free trade

Had history taken a different turn, we might remember Utah senator Reed Smoot as a pioneer of religious freedom. Fear of his Mormonism prompted an intense but unsuccessful three-year campaign by Protestant ministers to block his 1902 election to the senate.

Instead Smoot, who was the first Mormon senator and served for almost three decades, lives on in economic history as an architect of the Smoot-Hawley Tariff Act of 1930.

As every student of economics learns, his act raised tariffs on imports — ostensibly to protect American jobs at a time of crisis — but led to the trade war that increased the length and depth of the Great Depression. That resulted in Smoot leaving Congress in 1932 alongside his co-sponsor, Willis Hawley of Oregon.

The protectionist instincts on which Smoot and Hawley acted have never gone away — and in 2016 they came back to the fore.

Promises to bring back jobs shipped overseas, and threats to raise tariffs on goods entering the US from China and Mexico, were at the core of Donald Trump’s successful campaign for the presidency.

His “America First” doctrine has prompted fears that, come January and his entry to the Oval Office, he will deliver on his campaign promises and set off a global trade war.

What happens next is for 2017 to decide. But the truth is that all US presidents flirt with protectionism.

Barack Obama, who leaves office a proud free trader, in 2009 levied a 35 per cent tariff on imports of Chinese car tyres to protect American jobs.

The move, the president later claimed, saved 1,200 jobs. It also came at a high cost. One 2012 report calculated that the resulting higher prices of tyres cost US consumers $1.1bn a year, or $900,000 per job saved, and led to a net loss of 2,500 jobs across the economy.

The cost of protectionism has been a lesson illustrated again and again through economic history. “Protection is not only dead, but damned,” Benjamin Disraeli is said to have declared after Britain’s 1846 repeal of the corn laws.

But 170 years later Donald Trump is invoking the ghost of Reed Smoot and may soon be doing his best to prove the former British prime minister wrong.

ft.com/word

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