Letters to the Editor: Judicious Protectionism Can Work
Milton Friedman says that blaming the Smoot-Hawley Tariff Act for the 1929 stock-market crash and the subsequent Depression gives it too much "credit." ("Outdoing Smoot-Hawley," editorial page, April 20.) No doubt that's because the act wasn't passed until a year after the crash and simply gave a final boost to the very high tariffs of the prosperous '20s. But "protectionist" policies don't have to lead to a '30s-type contraction in world trade as Mr. Friedman warns.</br></br>Mr. Friedman says that despite Japanese auto restraints, the U.S. auto industry has prospered only by selling overseas or building cars with mostly Japanese parts. That's certainly not true in Chrysler's case -- our vehicles contain almost 90% domestic content (averaging in built-up cars and engines we import), our sales are almost totally North American (though we plan to move back into Europe), our productivity soared by more than 45% over four years, and our quality is back to world standards. Chrysler is living proof (and so is Japanese industry, which grew behind protectionist barriers) that selective government interventions can have positive outcomes if carefully applied.</br></br>The administration's recent decision to put 100% tariffs on certain items has already elicited from Japan more promises for systemic change than years of trade negotiations. But those promises won't translate into real change unless they are backed by a clear and consistent legislative policy, such as that contained in the much-misrepresented Gephardt amendment. Other policy tools have failed (sectoral negotiations) or been pushed to near their practical limits (exchange-rate adjustments). Allowing America's huge trade imbalance to persist will produce far less palatable adjustments (high interest rates, U.S. or even world economic contraction) than would the sensible assertion of this country's bottom-line interests.</br></br>Robert A. Perkins</br></br>Vice President, Washington Affairs