Talk:Smoot-Hawley Tariff Act

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As Smoot-Hawley neared passage King came under intense pressure from the Canadian Conservative Party and its leader, Richard Bedford Bennett, to retaliate. In May 1930 Canada imposed so-called countervailing duties on 16 products imported from the United States. The duties on these products -- which represented about 30 percent of the value of all U.S. merchandise exports to Canada -- were raised to the levels charged by the United States. In a speech, King made clear the retaliatory nature of these increases:
[T]he countervailing duties [are] designed to give a practical illustration to the United States of the desire of Canada to trade at all times on fair and equal terms. For the present we raise the duties on these selected commodities to the level applied against Canadian exports of the same commodities by other countries, but at the same time we tell our neighbour we are ready in the future to consider trade on a reciprocal basis.
Citation: O'Brien, Anthony. "Smoot-Hawley Tariff". EH.Net Encyclopedia, edited by Robert Whaples. August 15, 2001. URL http://eh.net/encyclopedia/article/obrien.hawley-smoot.tariff


Stancollins 02:12, 1 November 2005 (UTC)


Isn't this generally known as the Smoot-Hawley Tariff? -- Zoe

I've never heard of it referred to as such... am I just dumb? -- The T
"Smoot-Hawley Tariff be renamed and moved to Smoot-Hawley tariff" Are you kidding me? Try the Smoot-Hawley Tariff Act. - Jerryseinfeld 19:38, 22 Dec 2004 (UTC)


This page should make some reference to how high tariffs were before and after passage of the Act. - stancollins 11:55, 25 Jan 2005

Contents

[edit] Smoot-Hawley Tarrif Act - beneficial to an economy?

In no way is an increase in import tariffs beneficial to any economy. Classical, neo-Classical, Conservative, neo-Con, Liberal economists, all agree that the increased tariffs are a tax on consumers, decrease competition, increase prices, decrease demand, AND decrease domestic supply. Why should any domestic supplier increase output, or productivity, or quality, or decrease costs, or decrease price, if there is lessened competition? Sorry, there are two sets of persons benefitted by increased tariffs and decreased competition: oligopolistic industry and politicians paid for by them. Richard Macklin

I concur with Richard in the above paragraph. There are two actions that should probably be taken:
1.) Remove, or correct the paragraph that mistates the current understanding of the effect of tariffs,
2.) Create a section that does address the historical arguments, even if they are now considered unwise.
The paragraph states:
"There is still some historical debate as to whether the tariff was directly harmful to the US domestic economy or not. A revenue-generating tariff can be beneficial to an individual domestic economy, if other countries do not retaliate with tariffs of their own. However, in classical and neoclassical economic theory, a tariff above a certain level will in and of itself lower revenue, harm trade, and reduce the general welfare."
This is inaccurate. "still some historical debate" is contradictory. Either it is only historical or there is still some debate. Tariffs cannot benefit an entire economy by increasing govt revenues, because they inherently distort market prices in such a way that producers with a comparative advantage are be discouraged in favor of less efficient domestic producers. Keynesian economics may argue that government revenues allow government spending, which encourages growth, but there is no support for distortions away from efficient production. In the long term, tariffs are not likely to lead to prosperity and affluence in any national economy. Perhaps the only economic argument in favor of tariffs is a transitory support for a specific domestic industry. If a hypothical industry will be able to compete against external competitors, but is only limited by barriers to entry, temporarily hobbling external competitors (at the expense of the rest of the national economy) may allow that industry to catch up.
While this paragraph needs to be removed or corrected, the historical debate should be addressed. Presumably, Smoot and Hawley were not corrupt and trying to enrich specific interests. Even if they were corrupt, their nominal arguments are relevant to a historical understanding of how the bill passed. I think it would be useful to include a section on what the economic arguments were, and also what the non-economic arguments were. Among the non-economic arguments might have been: nationalism, whereby the national prosperity compared to other nations might be more important than overall prosperity; security, whereby less dependance on international trade gives a nation more lattitude for military actions, and less vulnerability to actions like embargos; and isolationism, whereby being able to carry on without the rest of the world shields a country from being 'entangled' in foreign wars or being exposed to the instability of poorly run foreign economies.
So, were the arguments primarily based on nineteenth-century understandings of the mechanics of macroeconomics? Did they present non-economic arguments? and if they did, did they address the economic costs of these possibly justifiable non-economic goals?
RandallZ 20:57, 21 May 2006 (UTC)

There was less need for Tariffs and Protectionism in the past, as the geographic isolation of the United States prevented excess trade. Today there is more need for protectionism than in the past, because it is much easier to communicate and ship goods. Our current state of resource gluttony and rotten urban cores is a result of the triumph of Southern Confederate culture and Wall Street Chicanery.

Actually, there is a contingent who believe that the protective tariffs from 1861 to 1973 were part of a consistent economic philosophy that was responsible for the dominance of the United States in the world economy. I think those arguments are incorrect on several counts. -Will Beback 22:26, 21 May 2006 (UTC)
Will, you're right, I wasn't remembering the history of tariffs very well and just read the Tariffs in the US article. I get how it is possible to debate that tariffs benefit an economy the same way that people argue that manipulating currency exchange rates do. But, I also agree with you that any of the ways that tariffs were supposed to help the economy fall apart under scrutiny. In fact, the ideas are a good argument in support of the drastic increase in statistics collection during FDR's administration.

nobody cares bout this so stop reading

The paragraph does still need to be corrected because it equates the government's fiscal state with the national economy as a whole without describing the connection. Instead of discussing the costs and benefits of protecting domestic industries, it talks about how tariff levels can be optimized to maximize tax revenue. There really should be a section that describes the historical reasoning that justified the Smoot-Hawley Act. This section can ackonowledge that some still support the same understanding of the effect of tariffs, but I do not think it is correct to list this as a mainstream opinion. Furthermore in relation to the national economy I believe it is the protectionist effects and not the tax revenues that primarily constitute that support for tariffs in general. RandallZ 18:27, 22 May 2006 (UTC)

[edit] Tariffs and Economy

I agree that tariffs are generally bad for economy, however the phrase "always harmful" may be inaccurate.

In terms of global economy, I agree that tariff is never directly benefitial because it restricts movement of goods. That being said, let us consider following situation.

Tariffs on foreign trade was a great revenue maker for governments. Some nations can produce certain products cheaper and better then others. For example, in 1920 (Roaring Twenties), Britain dominated ship-building, and China dominated silk export. There are always demand for ships, and there are always demand for silks. If USA was to raise tariffs on silk and ships, but not so high that demand would lower dramatically; US government can generate large revenue without much harm to economy. More money for government means more work projects and more employment (Keynesian Economy). More employment means more demands.

Also, I believe the purpose of some tariffs were to protect domestic economy, not to promote international trade. Tariffs are often made to discourage foreign competition, which indirectly benefit global economy in some cases. In 1998 USA banned (after imposing heavy tax) the sales of asian garlics. Asian farmers had over-produced garlics, and was using USA as a dumping ground. Imported asian garlics were sold at about 1/4 price of domestic garlic, US farmers simply cannot compete with the low price. If the asian garlics hasnt been banned, US farmers would lose a lot of money. Keep in mind the Great Depression was caused by overproduction (low price, but no demand), and that agriculture was the first to suffer. And also keep in mind USA has one of the largest deficit in the world, any blow to agriculture would likely collaspe US economy. If US economy collaspe, and cannot pay back its debt, rest of trading world will follow.

Increasing Internationial Trade isn't a beneficial end in and of itself. We accumulated such debts as a result of embracing free international trade, or "globalism". It is fair to default on these debts, provided we also renounce globalism and free international trade. Free International Trade is what lead the United States to its present state of oil addiction. Presently, the United States has proven itself alone amongst developed nations as being incapable of producing cities that aren't slummified hell holes. It should be noted that before and after the Hawley-Smoot Tariff, trade was a very small portion of the United States' economy. This is the preferable paradigm to embrace.

"Classical, neo-Classical, Conservative, neo-Con, Liberal economists, all agree that the increased tariffs are a tax on consumers" I believe what you referred to was their general theory on economy, which discourage taxes. However, there are exception, special cases you may have missed. You can ask economists whether abolishing all tax by tomorow would be a great idea, they would likely say no. I agree with the original article, and believe no change is necessary. -- Feb 14, 2005 - Maximilius

I must disagree here. The phrase "There is still some historical debate as to whether the tariff was harmful or not" *may* be true, but we ought to be able to cite some kind of defense of the Tariff if we can actually say there is debate. The phrase "A revenue-generating tariff can be beneficial to an economy" is generally regarded as true, but this ignores two issues: 1) it can be generally regarded as beneficial to the *domestic* economy as distinct from the world economy at large (few economists would say the latter), and more importantly 2) It is not my understanding that Smoot-Hawley comes under the rubric of a 'revenue-raising tarriff' in the first place. It is rather my understanding that it was a *prohibitive* tarriff by design. Even fewer are the economists (essentially only the most hardcore fringe of Marxist-Leninists) who would defend prohibitive tariffs as beneficial. This was the point of my earlier question as to the level of the Tariff before and after the Act. --stancollins, 05 April 2005

We are not responsible for the world economy. Our congressmen are not responsible for the world economy. Our only responsibility to the world is to not overthrow its democracies or relatively secular stable governments.

[edit] Which way?

Is it the Smoot-Hawley act or the Hawley-Smoot act? It doesn't look very good when both version are in use on the same page. --TACD 02:29, 27 Mar 2005 (UTC)

Well, according to The American Pageant by Thomas Bailey (a US history text), it's the Hawley-Smoot Tariff Act...I'm not going to change it until some sort of consensus is reached though. Basil Fawlty 01:13, 4 May 2005 (UTC)

From Peter Johnson (03:03, 11 November 2005 (UTC)): Names of U.S. laws are only informally known by the congressional sponsors’ last names (in this case, Smoot and Hawley). The article should at least mention the official name of the legislation. Does anyone know it?

According to the Department of State, it's "Smoot-Hawley". In the spirit of consistency, I would recommend this version--also in keeping with the title of the article.Infantsamuelatprayer 21:42, 4 May 2006 (UTC)

[edit] Causes of GD

"Although the tariff act was passed after the Stock Market Crash of 1929, many economic historians consider it a factor in deepening the Great Depression."

This is suspect as it implies that it's a fait accompli that the crash caused the depression. Any small reading into the subject will tell you that this is defiantly not the case. ZephyrAnycon 02:05, 5 Apr 2005 (UTC)

I disagree that this implication can be drawn (it's only citing beliefs--the majority of any group of 'experts' can be wrong at any time and often are), and it's probably true, but I suppose we haven't exactly done a survey. Stancollins 02:12, 1 November 2005 (UTC)

[edit] Level of the tariff before and after the act

On April 5, 2005, Stancollins mentioned raising a question "as to the level of the Tariff before and after the Act."

According to Richard M. Salsman, the Smoot-Hawley Tariff Act "imposed an effective tax rate of 60% on more than 3,200 products and materials imported into the US. Tariff rates had quadrupled." (For the source information, see here). Peter Johnson (01:34, 17 November 2005 (UTC))

[edit] Corrections

Two minor changes to the last sentence in section "Amount of the Tarriff":

Much of this debate has been centered upon Canada, the United States' largest trading partner, which raised ["their" changed to "its"] tariffs substantially in ["recent" changed to "subsequent"] years.

The first change is obviously a grammar correction, but the second I am unsure about. I assume that no one is debating whether changes to Canadian trade policy in the last decade or so are in retalliation against Smoot-Hawley, so I interpreted the word "recent" to mean around the same time as Smoot-Hawley, ie. in subsequent (or immediately subsequent?) years. If my interpretation is wrong, please correct and clarify. Joel Bastedo 20:21, 15 February 2006 (UTC)

The Canadians retaliated within months then elected an anti-US government that retaliated again. see the EH article that is first in the Readings. 20:25, 15 February 2006 (UTC)
I'm sure no one cares, but I edited the written form of the number of economists opposed to to this act (1,0280). I took out "and" from being in between the words "one thousand" and "twenty-eight", as this is incorrect. http://www.grammarbook.com/numbers/numbers.asp. we'll all sleep a little easier tonight, i think. somebody —Preceding unsigned comment added by 209.152.48.58 (talk) 23:32, 14 January 2008 (UTC)

[edit] Percentages

In the section entitled Economic Impact, it states that there was a 14% decline in GNP for the 17 nations studied and then lists the percents as follows: 8% due to the tariff rate increases; 5% due to deflation-related tariff increases; and 6% from non-tariff related issues. I assume that the 5% is a subset of the 8% listed before it, but the sentences indicates that three different percents, totaling 21%, are being discussed. Which is correct?

[edit] Demise of Tariff Act of 1930

I wish someone would provide the following: when and how the Act was finally superceded or repealed. Was there a general repudiation of it, or did trade agreements just wear off its teeth?

Are there elements of S-H tariffs that survive today? (I've understood that mattress tags "do not remove under penalty of law" had their start around Smoot-Hawley-- and the law has remained?)

[edit] counter arguments

Net exports as a percentage of GNP fell by less than 2.5 percent after this tariff. This could be explained largely because everybody's banks had gone under. The Banks were going under because Wall Street is fundamentally irrational, and they'd all loaned each other money to gamble on Wall Street.

Tariffs are necessary for any large industrialized country to stay industrialized. The balance between consumerism and conservation is maintained by moderation of trade. Competition is maintained by enforcement of anti-monopoly and anti-trust principles on domestic firms.

The eventuality of Free Trade is oil addiction for early front runners in the industrial revolution.

These are questionable. Less so is the need to maintain skills and assets for national security reasons. Sure, we could get all our food from South America and have Koreans build our warships, but that would leave the US in a vulnerable state. Once certain skills (like, say, building aircraft carriers) are gone, they're gone forever. Beyond that, though, tariffs tend to lead to reprisals, which lead to world economic trouble, which lead to world wars, as the 20th Century QED. —The preceding unsigned comment was added by 68.82.6.104 (talk) 14:45, 23 December 2006 (UTC).

[edit] Retailiation Again

The retaliation section is incomplete. The Smoot Hawley tariffs did invite retaliation, but if you look at the legislative history they were also passed as retaliation on other countries punitive tariffs. France for example had more restrictive tariffs in the 20s. A more complete view of the retaliation issue is needed here.

[edit] How Big Were the Tariffs? Were they record setting?

I just saw a Cambridge Economist Professor say that the range of tariffs over the previous 100 years was 37-55 percent and Smoot Hawley, although it did bring it from near the bottom of this range to the top half of the range, in no way set the record, as the first paragraph implies.