Protectionism in the United States

From Wikipedia, the free encyclopedia
Jump to: navigation, search

Protectionism in the United States is protectionist economic policy that erected tariff and other barriers to trade with other nations. This policy was most prevalent in the 19th century. It attempted to restrain imports to protect Northern industries. It was opposed by Southern states that wanted free trade to expand cotton and other agricultural exports. Protectionist measures included tariffs and quotas on imported goods, along with subsidies and other means, to ensure fair competition between imported goods and local goods.

History[edit]

Tariff Rates(France,Uk,Usa)
Average Tariff Rate in USA (1821-2016)
U.S. merchandise trade balance (1895-2015)

According to Michael Lind, protectionism was America's de facto policy from the passage of the Tariff of 1816 to World War II, "switching to free trade only in 1945, when most of its industrial competitors had been wiped out" by the war.[1] However, it has been argued that one of the underlying motivations for the American Revolution itself was a desire to industrialize, and reverse the trade deficit with Britain, which had grown by a factor of ten in the space of a few decades, from £67,000 (1721–30) to £739,000 (1761–70).[2]

The first U.S. Secretary of the Treasury, Alexander Hamilton, advocated tariffs to help protect infant industries in his "Report on Manufactures." Heeding Hamilton's advice, George Washington signed the Tariff Act of 1789, making it the Republic's second ever piece of legislation. Increasing the domestic supply of manufactured goods, particularly war materials, was seen as an issue of national security. Washington and Hamilton believed that political independence was predicated upon economic independence.[3]

For the most part, the "Jeffersonians" strongly opposed it. However, after the War of 1812, Thomas Jefferson himself acknowledged that tariffs were necessary for preventing import dependency, which undermined the nation's security. He confessed in a letter to his friend, Benjamin Austin in 1816:

…experience has taught me that manufactures are now as necessary to our independence as to our comfort: and if those who quote me as of a different opinion will keep pace with me in purchasing nothing foreign where an equivalent of domestic fabric can be obtained, without regard to difference of price…[4]

In the 19th century, statesmen such as Senator Henry Clay continued Hamilton's themes within the Whig Party under the name "American System." The fledgling Republican Party led by Abraham Lincoln, who called himself a "Henry Clay tariff Whig", strongly opposed free trade, and implemented a 44-percent tariff during the Civil War—in part to pay for railroad subsidies and for the war effort, and to protect favored industries.[5] This policy was continued by Presidents Ulysses S Grant and Theodore Roosevelt.[3] William McKinley (later to become President of the United States) stated the stance of the Republican Party (which won every election for President from 1868 until 1912, except the two non-consecutive terms of Grover Cleveland) as thus:

Under free trade the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man. [It is said] that protection is immoral…. Why, if protection builds up and elevates 63,000,000 [the U.S. population] of people, the influence of those 63,000,000 of people elevates the rest of the world. We cannot take a step in the pathway of progress without benefitting mankind everywhere. Well, they say, 'Buy where you can buy the cheapest'…. Of course, that applies to labor as to everything else. Let me give you a maxim that is a thousand times better than that, and it is the protection maxim: 'Buy where you can pay the easiest.' And that spot of earth is where labor wins its highest rewards.[6]

The United States maintained weighted average tariffs on manufactured products of approximately 40–50% up until the 1950s, although they dipped to lows of roughly 10% during the 1920s, which were augmented by the natural protectionism of high transportation costs in the 19th century.[7]

Southern states[edit]

Historically, slave-holding states had little perceived need for mechanization because of the low cost of manual labor. They supplied raw cotton to Britain, which supported free trade.

Northern states[edit]

Northern states sought to develop manufacturing industries and sought protections to allow nascent Northern manufacturers to compete with their more sophisticated British competitors. Beginning with the "Report on Manufactures", by the first US Secretary of the Treasury, Alexander Hamilton, the United States became the leading nation opposed to free trade. The report advocated measures to help protect infant industries, including bounties (subsidies) derived in part from those tariffs. Throughout the 19th century, leading US politicians, including Senator Henry Clay, supported Hamilton's approach within the Whig Party under the name "American System."

The opposed Southern Democratic Party contested elections throughout the 1830s, 1840s and 1850s in part over the issue of protection of industry. However, Southern Democrats were never as strong in the U.S. House of Representatives as the more populous North. The Northern Whigs achieved higher protective tariffs over the South's bitter resistance. One Southern state precipitated what came to be called the nullification crisis, over the issue of tariffs, arguing that states had the right to ignore federal laws.

Mostly over the issue of abolition and other scandals, the Whigs collapsed, leaving a void which the fledgling Republican Party, led by Abraham Lincoln filled. Lincoln, who called himself a "Henry Clay tariff Whig", strongly opposed free trade. He implemented a 44% tariff during the American Civil War in part to pay for the building of the Union Pacific Railroad, the war effort and to protect American industry.[8]

By President Lincoln's term, the northern manufacturing states had ten times the GDP of the South. With this advantage, the North was able to starve the South of weapons through a near total blockade, while supplying its own army with everything from heavy artillery to Henry repeating rifles.

With the Northern victory, Republican dominance was assured. Republicans continued to dominate American politics until the early 20th century.

President Ulysses S. Grant stated:

For centuries England has relied on protection, has carried it to extremes and has obtained satisfactory results from it. There is no doubt that it is to this system that it owes its present strength. After two centuries, England has found it convenient to adopt free trade because it thinks that protection can no longer offer it anything. Very well then, Gentlemen, my knowledge of our country leads me to believe that within 200 years, when America has gotten out of protection all that it can offer, it too will adopt free trade.[9]

President William McKinley stated the United States' stance under the Republican Party as:

Under free trade the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man. [It is said] that protection is immoral.... Why, if protection builds up and elevates 63,000,000 [the U.S. population] of people, the influence of those 63,000,000 of people elevates the rest of the world. We cannot take a step in the pathway of progress without benefiting mankind everywhere. Well, they say, 'Buy where you can buy the cheapest'.... Of course, that applies to labor as to everything else. Let me give you a maxim that is a thousand times better than that, and it is the protection maxim: 'Buy where you can pay the easiest.' And that spot of earth is where labor wins its highest rewards.[10]

Southern Democrats gradually rebuilt their party and allied themselves with Northern Progressives. They had many differences, but both opposed the corporate trusts that had emerged. This marriage of convenience to face a common enemy reinvigorated the Democratic Party, catapulting them to power.

Support among American politicians[edit]

From 1871 to 1913, “the average U.S. tariff on dutiable imports never fell below 38 percent [and] gross national product (GNP) grew 4.3 percent annually, twice the pace in free trade Britain and well above the U.S. average in the 20th century,” notes Alfred Eckes Jr., chairman of the U.S. International Trade Commission under President Reagan.

In 1896, the GOP platform pledged to “renew and emphasize our allegiance to the policy of protection, as the bulwark of American industrial independence, and the foundation of development and prosperity. This true American policy taxes foreign products and encourages home industry. It puts the burden of revenue on foreign goods; it secures the American market for the American producer. It upholds the American standard of wages for the American workingman.”

George Washington[edit]

"I use no porter or cheese in my family, but such as is made in America,” the inaugural President George Washington wrote, boasting that these domestic products are “of an excellent quality.”

One of the first acts of Congress Washington signed was a tariff among whose stated purpose was “the encouragement and protection of manufactures.”

In his 1790 State of the Union Address, Washington justified his tariff policy for national security reasons:

A free people ought not only to be armed, but disciplined; to which end a uniform and well-digested plan is requisite; and their safety and interest require that they should promote such manufactories as tend to render them independent of others for essential, particularly military, supplies[11]

Thomas Jefferson[edit]

In 1816, President Thomas Jefferson said, “manufactures are now as necessary to our independence as to our comfort… keep pace with me in purchasing nothing foreign where an equivalent of domestic fabric can be obtained, without regard to difference of price.”

As Jefferson wrote in explaining why his views had evolved to favor more protectionist policies: “In so complicated a science as political economy, no one axiom can be laid down as wise and expedient for all times and circumstances, and for their contraries.”

After the War of 1812, Jefferson's position began to resemble that of Washington, some level of protection was necessary to secure the nation's political independence:

experience has taught me that manufactures are now as necessary to our independence as to our comfort: and if those who quote me as of a different opinion will keep pace with me in purchasing nothing foreign where an equivalent of domestic fabric can be obtained, without regard to difference of price[12]

Henry Clay[edit]

In 1832, then the United States Senator from Kentucky, Henry Clay said about his disdain for “free traders”[1] that "it is not free trade that they are recommending to our acceptance. It is in effect, the British colonial system that we are invited to adopt; and, if their policy prevail, it will lead substantially to the re-colonization of these States, under the commercial dominion of Great Britain.”

Clay said:

When gentlemen have succeeded in their design of an immediate or gradual destruction of the American System, what is their substitute? Free trade! Free trade! The call for free trade is as unavailing as the cry of a spoiled child, in its nurse’s arms, for the moon, or the stars that glitter in the firmament of heaven. It never has existed; it never will exist. Trade implies, at least two parties. To be free, it should be fair, equal and reciprocal.

Clay explained that “equal and reciprocal” free trade “never has existed; [and] it never will exist.” He warned against practicing “romantic trade philanthropy… which invokes us to continue to purchase the produce of foreign industry, without regard to the state or prosperity of our own.” Clay made clear that he was “utterly and irreconcilably opposed” to trade which would “throw wide open our ports to foreign productions” without reciprocation.

Andrew Jackson[edit]

Henry Clay’s longtime rival and political opponent, President Andrew Jackson, in explaining his support for a tariff, wrote:

We have been too long subject to the policy of the British merchants. It is time we should become a little more Americanized, and, instead of feeding the paupers and laborers of Europe, feed our own, or else, in a short time, by continuing our present policy, we shall all be paupers ourselves.

James Monroe[edit]

In 1822, President James Monroe observed that “whatever may be the abstract doctrine in favor of unrestricted commerce,” the conditions necessary for its success—reciprocity and international peace—“has never occurred and can not be expected.” Monroe said, “strong reasons… impose on us the obligation to cherish and sustain our manufactures.”

Abraham Lincoln[edit]

President Abraham Lincoln declared, “Give us a protective tariff and we will have the greatest nation on earth.” Lincoln warned that “the abandonment of the protective policy by the American Government… must produce want and ruin among our people.”

Lincoln similarly said that, “if a duty amount to full protection be levied upon an article” that could be produced domestically, “at no distant day, in consequence of such duty,” the domestic article “will be sold to our people cheaper than before.”

Additionally, Lincoln argued that based on economies of scale, any temporary increase in costs resulting from a tariff would eventually decrease as the domestic manufacturer produced more.

Lincoln did not see a tariff as a tax on low-income Americans because it would only burden the consumer according to the amount the consumer consumed By the tariff system, the whole revenue is paid by the consumers of foreign goods… the burthen of revenue falls almost entirely on the wealthy and luxurious few, while the substantial and laboring many who live at home, and upon home products, go entirely free.

Lincoln argued that a tariff system was less intrusive than domestic taxation: The tariff is the cheaper system, because the duties, being collected in large parcels at a few commercial points, will require comparatively few officers in their collection; while by the direct tax system, the land must be literally covered with assessors and collectors, going forth like swarms of Egyptian locusts, devouring every blade of grass and other green thing.[13]

William McKinley[edit]

President William McKinley supported tariffs:

Under free trade, the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man[14]

[Free trade] destroys the dignity and independence of American labor… It will take away from the people of this country who work for a living—and the majority of them live by the sweat of their faces—it will take from them heart and home and hope. It will be self-destruction.[15]

He also rejected the “cheaper is better” argument outright:

They [free traders] say, ‘Buy where you can buy the cheapest.’ That is one of their maxims… Of course, that applies to labor as to everything else. Let me give you a maxim that is a thousand times better than that, and it is the protection maxim: ‘Buy where you can pay the easiest.’ And that spot of earth is where labor wins its highest rewards.

They say, if you had not the Protective Tariff things would be a little cheaper. Well, whether a thing is cheap or whether it is dear depends on what we can earn by our daily labor. Free trade cheapens the product by cheapening the producer. Protection cheapens the product by elevating the producer.

The protective tariff policy of the Republicans… has made the lives of the masses of our countrymen sweeter and brighter, and has entered the homes of America carrying comfort and cheer and courage. It gives a premium to human energy, and awakens the noblest aspiration in the breasts of men. Our own experience shows that it is the best for our citizenship and our civilization and that it opens up a higher and better destiny for our people.[16]

Theodore Roosevelt[edit]

President Theodore Roosevelt believed that America's economic growth was due to the protective tariffs, which helped her industrialize. He acknowledged this in his State of the Union address from 1902:

The country has acquiesced in the wisdom of the protective-tariff principle. It is exceedingly undesirable that this system should be destroyed or that there should be violent and radical changes therein. Our past experience shows that great prosperity in this country has always come under a protective tariff.[17]

Donald Trump[edit]

Commentators and news outlets have largely called President Donald Trump's economic policies protectionist and generally opposed to free trade.[18][19][20] In his first address to a joint session of Congress, Trump said:

Currently, when we ship products out of America, many other countries make us pay very high tariffs and taxes.  But when foreign companies ship their products into America, we charge them nothing, or almost nothing... I believe strongly in free trade but it also has to be fair trade.[21]

See also[edit]

References[edit]

  1. ^ Michael Lind, "Free Trade Fallacy", New America Foundation, January 1, 2003.
  2. ^ Morrison, Spencer P (2016). America Betrayed. Edmonton: Outremer Publishing Ltd. p. 67. 
  3. ^ a b Morrison, Spencer P. (2016-12-23). "America's Protectionist Past: The Hidden History Of Trade". National Economics Editorial. Retrieved 2016-12-30. 
  4. ^ Jefferson, Thomas (February 19, 1816). "Letter to Benjamin Austin, Jan 9, 1816". Retrieved December 29, 2016. 
  5. ^ Lind, Matthew. "Free Trade Fallacy". Prospect. Archived from the original on 6 January 2006. Retrieved 3 January 2011. 
  6. ^ William McKinley speech, October 4, 1892 in Boston, MA William McKinley Papers (Library of Congress)
  7. ^ Morrison, Spencer P. (2016-12-23). "America's Protectionist Past: The Hidden History Of Trade". National Economics Editorial. Retrieved 2017-01-04. 
  8. ^ newamerica.net, Lind, Michael. New America Foundation.
  9. ^ http://www.fpif.org/reports/kicking_away_the_ladder_the_real_history_of_free_trade
  10. ^ William McKinley speech, Oct. 4, 1892 in Boston, MA William McKinley Papers (Library of Congress)
  11. ^ "George Washington: First Annual Message to Congress on the State of the Union". www.presidency.ucsb.edu. Retrieved 2017-01-04. 
  12. ^ Jefferson, Thomas (Jan 9, 1816). "Letter to Benjamin Austin, Jan 9, 1816". Boston Independent Chronicle. 
  13. ^ "Collected Works of Abraham Lincoln. Volume 1.". quod.lib.umich.edu. Retrieved 2017-01-04. 
  14. ^ Halstead, Murat; Munson, Augustus J. (1901-01-01). Life and distinguished services of William McKinley: our martyr President. Memorial Association. 
  15. ^ McKinley, William (1893-01-01). Speeches and Addresses of William McKinley: From His Election to Congress to the Present Time. D. Appleton. 
  16. ^ https://books.google.fr/books?id=Qe5gk4hoJXAC&printsec=frontcover&source=gbs_ge_summary_r&redir_esc=y#v=onepage&q&f=false
  17. ^ "Almanac of Theodore Roosevelt – Speeches of Theodore Roosevelt – Teddy Roosevelt". www.theodore-roosevelt.com. Retrieved 2017-01-04. 
  18. ^ Srivastava, Spriha (2017-01-24). "Trump's protectionism may hit emerging markets but not China". CNBC. Retrieved 2017-03-24. 
  19. ^ "The GOP's Foolish Accommodation of Trump on Trade". National Review. Retrieved 2017-03-24. 
  20. ^ CNN, Eric Bradner. "Trump, Sanders and the protectionist revolution". CNN. Retrieved 2017-03-24. 
  21. ^ "Remarks by President Trump in Joint Address to Congress". whitehouse.gov. 2017-02-28. Retrieved 2017-03-24.