Herbert Hoover is rightly reviled for having the worst record on international trade of any president. The Smoot-Hawley Tariff, which Hoover signed into law in 1930 after a Republican Congress passed it, was a significant factor in deepening the Great Depression. Since then, every president has embraced at least the rhetoric of free trade. But actions and rhetoric are different things, and George W. Bush in particular has preached free trade while advancing the agenda of a petty protectionist.
In so doing, he’s returning his party to its roots. From Lincoln through Hoover, a high tariff on imported manufactured goods was the foundation of Republican trade policy. The Democrats, as the party of the workingman, backed free trade. They understood that tariffs raised the prices of goods, fattened the profits of politically connected businessmen, and acted like a tax on the poor.
After Smoot-Hawley led to a collapse of world trade and helped sow the seeds of World War II, a bipartisan anti-protectionist consensus emerged. Protection, it was understood, could lead to tit-for-tat retaliation by other countries that might explode into a trade war or even a shooting war. One of Franklin Roosevelt’s first acts in office was to reverse Smoot-Hawley. He later insisted that freer trade be a key element of postwar planning, which led to the creation of the General Agreement on Tariffs and Trade. Harry Truman required nations receiving Marshall Plan aid to adopt free trade policies, a decision that probably did more to revive Europe’s economies than the aid itself. Dwight Eisenhower supported creation of the Organization for Economic Cooperation and Development to help maintain free trade among major industrialized countries.
From then on every president had a hand in liberalizing world trade. John Kennedy initiated a round of multilateral trade negotiations, concluded under Lyndon Johnson, that eventually led to a reduction in world tariff levels by about a third. Under Richard Nixon, another round of trade negotiations began, known as the Tokyo Round, which Jimmy Carter finally pushed through an increasingly protectionist Democratic Congress in 1979.
Slowing Down Fast Track
By the 1980s, the parties had largely reversed their historical positions on trade. The Democrats, especially in Congress, had come to view protectionism as a way to protect jobs for working people rather than as a tax on them. And with American businesses becoming increasingly multinational, Republicans now saw free trade and access to foreign markets as central to their constituency. Ronald Reagan initiated talks with Canada and Mexico on establishing a North American free trade zone and inaugurated another multilateral trade negotiation known as the Uruguay Round. George H.W. Bush pushed forward negotiations on both the Uruguay Round and the North American Free Trade Agreement, known as NAFTA. Bill Clinton concluded the Uruguay Round and rammed NAFTA through Congress despite strong resistance from his own party.
George W. Bush came into office hoping to expand world trade by further breaking down barriers, which increasingly take the form of subsidies that distort prices and create an unlevel playing field. His first U.S. trade representative, Bob Zoellick, was widely known for his commitment to open markets and was anxious to start a new round of trade negotiations.
But before negotiations can begin, Congress has to give the president negotiating authority, sometimes called fast-track authority. The president could negotiate whatever he wants and then submit it to Congress for approval.
But without negotiating authority in advance, such an effort likely would succumb to the inevitable amendments and filibusters. Fast-track authority gets Congress to bind itself to granting an up-or-down vote on the package at the end of the process, with no further political gamesmanship.
In 2001 Congress was not in the mood to grant that authority. Democrats were against anything that would either expand trade (and thus, in their opinion, threaten American jobs) or help Bush, whose election many considered illegitimate. GOP control of Congress was very thin, and with the economy in recession many Republicans were skittish about voting to promote trade if it might be seen as threatening domestic jobs.
Republicans in the steel-producing districts of Pennsylvania, Ohio, and West Virginia were especially fearful of electoral retaliation. They demanded that Bush do something to help the steel industry as the price for their vote on trade-negotiating authority.
In June 2001, Bush initiated an investigation by the U.S. International Trade Commission into whether the steel industry was being injured by imports. It was virtually preordained that the commission would find such injury, because of the low legal threshold for such a determination. The commission did indeed find injury in December. Under the law, President Bush had until March to decide what actions he would take to protect the steel industry.
At the same time, Republicans from agricultural areas were complaining about low farm prices and demanding more subsidies, even though Bush had promised to move toward a more market-based agricultural system during the 2000 campaign. It was vital Bush do the right thing on the 2002 agriculture bill because the whole point of the trade negotiations, known as the Doha Round, was to remove subsidies for agriculture, which cost taxpayers in the industrialized countries dearly while making it impossible for farmers in the developing world to compete and better themselves.
In both cases, Bush made exactly the wrong decision.