[FOUNTAIN]Hot issue, cold steelIn June 1930, the Hawley-Smoot Tariff Act, co-sponsored by Representative Willis C. Hawley and Senator Reed Smoot, both Republicans, was signed by then U.S. President Herbert Hoover. Senator Hawley argued that the United States had no choice but to raise tariffs to protect U.S. industries, which were facing collapse due to cheap imports.
The act raised tariffs up to 50 percent, bringing U.S. tariffs to the highest protective level in the history of the country. The creation of the act provoked retaliatory steps in 25 countries, including the United Kingdom and Germany. In the following year, global trade plunged by two-thirds. The Great Depres-sion spread its cold fingers throughout the world, which eventually led to the eruption of World War II.
In the book "From Here to Economics," published in 1995, the U.S. economist Todd G. Buchholz named the Hawley-Smoot Tariff Act and Europe's retaliatory actions the worst economic policies in the world in the 20th century.
Last week, U.S. President George W. Bush decided to impose tariffs of up to 30 percent on most steel imports. This may not be as destructive as the Hawley-Smoot Tariff Act, but the resistance from countries against the protectionist measure will certainly be as strong as those seven decades ago. In a prompt reprisal, Russia banned the imports of American poultry and refused to issue visas to the U.S. negotiations team. The Financial Times, a British daily, called Mr. Bush's action "cold steel," comparing it to the cold mood prevailing in the Cold War era.
Mr. Bush's action also stirred up controversy domestically. A column that David Ignatius contributed to the Washington Post on Sunday can help one understand what really went wrong. According to the column, from 1967 to 1979 hourly employment costs in the steel industry in the United States rose at an annual rate of 12.1 percent while the industry's output grew just 2 percent a year. Mr. Ignatius argues that none of the U.S. steel companies would be able to survive at that level. Nevertheless, they attempted to find a comfort zone by excluding outside competition.
Far-fetched policies invite opposition. When the Hawley-Smoot Tariff Act was pushed forward, more than 1,000 U.S. economists petitioned Congress to scrap the act. Similar reactions appeared this time. Will President Bush listen to an opposing voice this time and not follow Mr. Hoover's lead? That's unlikely to happen.
The writer is an editorial writer of the JoongAng Ilbo.
by Sohn Byoung-soo