;


Dartmouth’s Douglas Irwin agrees that trade policy is important. But all manner of powers are wrongly laid at its door.

Historians in the News
tags: Trade Policy, Douglas Irwin, Clashing over Commerce



Trade-policy wonks are gluttons for punishment. In good times, their pet topic is dismissed as dull. In bad, they find trade being faulted for everything. As Donald Trump blames America’s economic woes on terrible trade deals, one geek is fighting back. In “Clashing over Commerce”, Douglas Irwin of Dartmouth College tells the history of American trade policy, showing that trade is neither dull nor deserving of the attacks on it.

Few could accuse America’s early trade history of lacking drama. Rules requiring American ships to send most of their cargo via British shores bred resentment against the colonial rulers. In 1773, when the British government tried to put smugglers out of business by slashing the official duty on tea, the Boston Tea Party protests followed, leading to an embargo and, ultimately, a war of independence.

After the American constitution gave authority on trade matters to Congress, the stage was set for centuries of wrangling. On the surface, tariffs did seem boring. Specific duties for items like molasses, salt and nails were motivated by the need for tax revenue; between 1790 and 1860 tariffs accounted for 90% of the federal tax take. But beneath the tangle of bureaucracy, bigger debates raged. Proponents wanted to shelter nascent industries, but opponents worried that they would shelter inefficient producers, push up prices and encourage smuggling. Alexander Hamilton, one of America’s Founding Fathers, justifiably worried that raising tariffs would provoke trading partners to do the same.

Trade creates winners and losers, and in America, these have often lived far from each other, generating divisions in Congress. Before the civil war, Southern exporters—their cotton competitive in global markets because of their slave labour—despised tariffs, whereas import-competing industries in the North enjoyed the protection. Given America’s institutional set-up, the result was stasis: the system has a bias towards the status quo.

Only twice has the broad direction of policy shifted, according to Mr Irwin. Both reconfigurations were triggered by catastrophic events. The civil war led to a new political balance, away from the southerners who favoured free trade. And as federal spending soared after the war, more tax revenue was needed. Special-interest groups organised to cheer their protections, including people like James Swank, founder of the American Iron and Steel Association, who wrote that “protection in this country is only another name for Patriotism.” (He was not the last of his kind.) ...

Read entire article at The Economist


comments powered by Disqus