Suppose the mercantilist model--that centuries-old paradigm of planned, coordinated, "balanced" protectionism now resurrected by William R. Hawkins to create a stronger America--were a viable policy alternative in August 1945, at the end of World War II. And let us take this supposition as an opportunity to assess the U.S. trade record, to see where it has been, economically and politically, and perhaps to see where it is heading. After all this, we may better see just what Hawkins has in mind.
With the end of the Second World War, America, then by far the greatest military and economic power on earth, faced an extraordinary challenge: What kind of postwar world should America nurture? Broadly it had two options.
First, should the United States retreat to its mercantilist, isolationist, divisive, protectionist, and inadvertently contentious stance of the twenties and thirties?
Consider the history behind this question. Congress, which refused to ratify the Treaty of Versailles, rejected U.S. membership in the League of Nations. In 1922, Congress adopted the Fordney-McCumber Tariff, which led to a 44 percent average tariff on dutiable imports. That percentage was boosted to nearly 60 percent by the more widely imposed Smoot-Hawley Tariff of 1930, a record tariff that touched off retaliatory protectionism and divisiveness around the world. It also exacerbated the Great Depression (economist Jude Wanniski says Smoot-Hawley caused it) and contributed to the frictions that led to the Second World War.
Under newly installed President Harry S. Truman, America in 1945 carried forward the flag of leadership earned by military victories in war-ravaged Europe and Asia. Therefore, should America seek a united, not a divided, globe, an international fraternity of nations predicated on, to borrow the slogan of IBM, "World Peace through World Trade," an international fraternity wherein nations are free to exchange goods and services, ideas and technology, capital and tourists, for the benefit of all concerned?
Wisely, I think, America chose the second option, though it still clung to a number of mercantilistic ideas advocated in the accompanying article by William Hawkins. America fostered the United Nations, headquartered in New York, and the General Agreement on Tariffs and Trade (GATT), headquartered in Geneva.
GATT, which celebrated its fortieth anniversary in 1987, seeks to promote free trade by requiring member nations signatory to any tariff reduction treaty to extend that reduction, under the most-favored-nation principle, to all other GATT members. While GATT has been successful in reducing tariffs, it has been less so in reducing nontariff trade barriers such as quotas and other methods of preferential treatment. The outlook for world trade, while generally optimistic in my view, is still fraught with the potential for reverses.
As human institutions, both GATT and the United Nations have proved to be fallible organizations. The road to trade liberalization has not been easy, and as suggested above, it will not be easy in the years ahead. Nonetheless, with U.S. tariffs today at their lowest in history, averaging less than 4 percent on all imports, and with similar tariff reductions by the industrialized trading partners of the
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