“An ACT for laying DUTY on GOODS, WARES, and MERCHANDIZES imported into the UNITED STATES”
“Whereas it is necessary for the support of government, for the discharge of the debts of the United States, and the encouragement and protection of manufacturers, that duties be laid on goods, wares, and merchandizes imported.”
These words begin the 2nd bill passed by the U.S. Congress, in 1789, and was endorsed by Thomas Jefferson and James Madison. President Lincoln launched America’s steel industry when he refused to import steel from England for the Transcontinental Railroad. President Franklin Roosevelt protected oil and President Kennedy protected textiles. The United States was built on protectionism and, for more than a century, financed it with tariffs. And it worked. In 2002, President Bush announced tariffs on imported steel from the European Union. He did this to protect our steel industry saying “I decided these imports were severely affecting … an important industry.”
Above, I have listed examples to why politicians might impose protectionist policies. One is to raise revenue, as evident by the bill passed in 1789. Another is to shield a new industry such as President Lincoln did when he enabled the America steel industry a chance to build up production to the point they could compete with a long-established industry.
Protectionist policies also preserve jobs. By restricting imports, jobs will be saved and even created here. Those that support “free-trade” may argue that jobs will be lost by protectionism. They will state that in the special interest groups that lobby for the policy a few jobs may be saved, but at the cost of many others. The Clinton Administration claimed that the North American Free Trade Agreement (NAFTA) would create over 200,000 U.S. jobs. Three years after it was signed into law, the Clinton Labor Department conceded that 109,000 were lost to NAFTA. Public Citizen, Ralph Nader’s organization, released a report calculating NAFTA job losses at 600,000.
Protectionism will also prevent unfair competition by countries that exploit cheap labor costs in their country to undercut the price of the same goods manufactured here. General Electric, Mattel, and Johnson & Johnson, had taken very public roles in lobbying for NAFTA and testified that over 10,000 new jobs could be created by NAFTA when in fact these same companies alone laid off over 3,000 employees because of a “shift in production to Mexico” and “increased company imports from Mexico.”
Those that support “free-trade” will claim that international trade increases competition, and competition reduces costs. Competition can reduce costs in one of two ways: by increasing efficiency or by lowering standards. When a country requires that environmental costs to be internalized engages in “free-trade” with a country that does not, the tendency will be for more and more production to be shifted to the latter. This is another reason why the U.S. is losing jobs to Mexico.
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