Wednesday, August 01, 2007

1,028 Then and Now

1,028 economists who are against imposing retaliatory trade measures against China signed the Club for Growth petition that includes almost 50 percent Republicans and 50 percent Democrats. Bravo!

Seventy-seven years ago, 1,028 economists in both political parties petitioned Herbert Hoover to veto the Smoot-Hawley tariff bill. Hat tip to Greg Mankiw's blog site for reprinting the New York Times article.

While the Hoover-Smoot-Hawley tariff was a huge hike in tariff rates, and Dodd-Shelby and other Congressional bills would impose retaliatory duties unless China significantly raises its Yuan currency exchange rate, the potential trade war similarities are very worrisome. As was the case in the 1930s, legislation proposed today could spark a China trade war that conceivably could spread worldwide. Of course, this would put an end to the record-setting global economic boom.

The White House is opposed to any of these China bashing bills, but as yet the President has not indicated clearly that he would veto.

Senators Baucus and Grassley have a protectionist bill. House members Timothy Ryan (D-OH) and Duncan Hunter (R-CA) have a bill. And of course Sen. Chuck Schumer and Lindsey Graham started the anti-China ball rolling a couple of years ago.

Hats off to the Club for Growth for sponsoring their free trade petition. Trade barriers or tariffs amount to tax hikes on international commerce, which are just as bad as tax hikes on domestic work, saving, investment, and entrepreneurship. Both are growth-stopping.