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More on Smoot-Hawley

Seventy-seven years ago today President Herbert Hoover signed the Smoot-Hawley tariff bill; he and the Congress thereby raised tariff rates to unprecedented heights.  Here’s a summary:

But while the tariff might not have caused the Depression, it certainly did not make it any better. It provoked a storm of foreign retaliatory measures and came to stand as a symbol of the “beggar-thy-neighbor” policies (policies designed to improve one’s own lot at the expense of that of others) of the 1930s. Such policies contributed to a drastic decline in international trade. For example, U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934. More generally, Smoot-Hawley did nothing to foster trust and cooperation among nations in either the political or economic realm during a perilous era in international relations

Protectionism doesn’t achieve even its own nonsense goal of increasing  exports.  A revealing, specific example involves eggs.  Smoot-Hawley raised the tariff on egg imports into the U.S. from eight cents to ten cents per dozen.  This higher tariff caused eggs imports from Canada to fall by 40 percent.  In response, Canadian authorities increased the tariff on U.S. eggs exported to Canada; this tariff went from three cents per dozen to ten cents per dozen.  The result was that American eggs exports to Canada fell by 98 percent – from 11 million annually just before Smoot-Hawley to a mere 200,000.   (I found this tidbit in Jeffry Friedan’s 2006 book Global Capitalism.)