[Viewpoint]The audacity of free tradePeople are truly oblivious animals. We do not learn from our failures in history. The world is getting stalked by the ghost of protective trade again. It is already a proven fact that building a high fence of trade barriers during a financial crisis is a shortcut to the collapse of the world economy. This was exactly what happened during the Great Depression some 80 years ago.
In 1930, United States President Herbert Hoover signed the Smoot-Hawley Tariff Act that froze the international economy in its tracks. [It piled on the highest protective tariffs on imports on top of the Fordney?McCumber Tariff Act of 1922 which imposed a maximum of 400 percent duty on imported industrial goods for the protection of U.S. industries.] Of course, other countries did not take things lying down. They all raised customs duties, and this led to a vicious circle of retaliations with higher tariffs. When one country blocked imports, its neighboring exporting country grew poor. When the neighboring country that became poor could not afford imports any longer, the original country grew poor, too, because it could not export either. In this way, poverty spread throughout the world like an epidemic. This is the reason why the Great Depression was prolonged and became painful.
There are signs that such scenes from another era will be repeated. American President Barack Obama, who offered “the audacity of hope” to the American people by becoming their 44th president has been creating unease for the international community since the beginning of his term. As he shows an inclination towards “Buy American” and “Hire American” policies, it looks like a fire of protective trade could spread throughout the world.
But we can’t spend all our time worrying. At a time like this, we should collect our minds and try to find a ray of hope. There is bound to be some pioneer who turns a crisis into an opportunity. A good example was Cordell Hull (1871-1955), who spread the seeds of free trade all alone when the pains of the Great Depression were becoming unbearable. When he was in Congress in 1916, he arrived at a conclusion while analyzing the cause of World War I: “When commodities cannot cross borders, soldiers do.”
The cause of war was the protective trade barriers of each country. He confronted the strong winds of protective trade to preach the belief, “The trade barriers should be lowered for all countries to prosper together and live in peace.”
However, his opinion was not heard widely at the time.His fellow members of Congress who were concerned about immediate benefits before their eyes did not listen to him. Hull was treated like a heretic, but he still did not give up. When Democratic Party candidate Franklin D. Roosevelt was elected president in 1932, he begged him, “This is the only way for us all to live.”
Roosevelt took his hand. Hull was appointed secretary of state in 1933, and he enacted the Reciprocal Trade Agreement Act the next year. It was a law lowering customs duties and carrying out free trade.
As a result, the United States concluded trade agreements with 27 countries between 1934 and 1944. Customs duties of countries that signed the trade agreements were lowered by an average of 44 percent, and exports increased by 60 percent during this period.
Of course, this law was not the decisive factor that overcame the Great Depression. However, this is how the seedling of free trade started to grow.
The General Agreement on Tariffs and Trade, which provided the platform for free trade and the market economy since the end of World War II, was the extension of the reciprocal trade agreements.
The GATT was succeeded by the World Trade Organization. The foundation for free trade was thus established, like a new flower sprouting in the middle of the coldest winter, when the wave of protective trade was at its strongest.
Doesn’t the solution seem obvious at this point? Let us become more like Hull, instead of waiting on Obama. Let’s have the courage of implementing the spirit of free trade at a time when the temptation of protective trade is sweeping the world.
Korea, together with the United Kingdom and Brazil, is going to co-chair the G?20 conference in April. What about Korea introducing an epoch-making trade act that guarantees free trade to the whole world on this occasion? It is also essential that the National Assembly ratify the Korea?U.S. free trade agreement as soon as possible.
Charles Kindleberger, an economic historian, called the reciprocal trade agreement enacted by Hull, “A monument of respect for a politician who stood by his beliefs” in his book, “The World in Depression.”
This is the opportunity for Korea, which has been on the periphery of trade until now, to create “a monument of respect” that can make Korea a leading free trade country.
*The writer is a deputy economic news editor of the JoongAng Ilbo.
by Kim Jong-yoon