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 WASHINGTON, DC: May 03, 2018. As China cancels nearly 63,000 tons of US soya bean exports after Donald Trump's imposition of trade tariffs against the country, over 1,000 economists have written an open letter to Trump and Congress warning against new protectionist policies.

This letter, which includes signatories from 15 Nobel laureates and former economic advisers to the Reagan, Clinton, Bush and Obama Administrations, is published on the anniversary of a similar letter in 1930 warning against the Smoot-Hawley Act that was meant to protect American jobs, but actually prolonged and worsened the Great Depression:

“In 1930, 1,028 economists urged Congress to reject the protectionist Smoot-Hawley Tariff Act. Today, Americans face a host of new protectionist activity, including threats to withdraw from trade agreements, misguided calls for new tariffs in response to trade imbalances, and the imposition of tariffs on washing machines, solar components, and even steel and aluminum used by U.S. manufacturers.

“Congress did not take economists’ advice in 1930, and Americans across the country paid the price. The undersigned economists and teachers of economics strongly urge you not to repeat that mistake. Much has changed since 1930 -- for example, trade is now significantly more important to our economy -- but the fundamental economic principles as explained at the time have not:

“We are convinced that increased protective duties would be a mistake. They would operate, in general, to increase the prices that domestic consumers would have to pay. A higher level of protection would raise the cost of living and injure the great majority of our citizens.

“Few people could hope to gain from such a change. Construction, transportation and public utility workers, professional people and those employed in banks, hotels, newspaper offices, in the wholesale and retail trades, and scores of other occupations would clearly lose, since they produce no products which could be protected by tariff barriers.

“The vast majority of farmers, also, would lose through increased duties, and in a double fashion. First, as consumers they would have to pay still higher prices for the products, made of textiles, chemicals, iron, and steel, which they buy. Second, as producers, their ability to sell their products would be further restricted by barriers placed in the way of foreigners who wished to sell goods to us.

“Our export trade, in general, would suffer. Countries cannot permanently buy from us unless they are permitted to sell to us, and the more we restrict the importation of goods from them by means of ever-higher tariffs the more we reduce the possibility of our exporting to them. Such action would inevitably provoke other countries to pay us back in kind by levying retaliatory duties against our goods.

“Finally, we would urge our Government to consider the bitterness which a policy of higher tariffs would inevitably inject into our international relations. A tariff war does not furnish good soil for the growth of world peace.”

The Washington, DC-based non-profit National Taxpayers Union organised the letter. Director of its Free Trade Initiative Bryan Riley commented: “Very few policy areas generate as much consensus among professional economists like free trade does. Protectionism is flat-earther economics.”

 

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