Shades of Smoot-Hawley

As the bill moved through Congress, formal protests from foreign countries flooded into Washington, eventually adding up to 200 pages. Both houses voted aye nonetheless. While the legislation sat on the President's desk, 1,028 American economists called for a veto. Herbert Hoover made it the law of the land anyway, swallowing his own reservations and, on June 17, signing the Tariff Act of 1930.

Known as Smoot-Hawley after its legislative sponsors, the bill promptly fulfilled the worst fears of critics. A new panic seized the already battered stock market; the slide continued for two years. In raising import duties on scores of items, in some cases to 50%, the measure provoked angry retaliation by 25 of the nation's trading partners. U.S. exports fell by nearly two-thirds in just two years.

How did Hoover, a President well versed in international commerce, fall into such a trap? In part, he was bound by the 1928 Republican platform, which promised tariffs to help the ailing farm economy. A crisis atmosphere took hold a year later with the stock market crash and the onset of the Great Depression. For decades the Republicans had been sympathetic to protectionism; now they saw trade barriers as a means of placating demands that the Government do something concrete to fight unemployment.

Willis Hawley of Oregon chaired the House Ways and Means Committee, and Reed Smoot of Utah headed the Senate Finance Committee. Both were fiscal experts with more than 20 years of service on Capitol Hill. But, responding to pressure from organized labor and some sectors of industry, they transformed what was to be an agricultural measure into a comprehensive increase in tariffs.

Hoover was hemmed in by tradition and the G.O.P. platform. Henry Ford spent an evening at the White House pleading for a veto of what he called "an economic stupidity." Other automobile executives backed Ford. But no President had ever vetoed a tariff measure, and Hoover was not about to be the first. "With returning normal conditions, our foreign trade will continue to expand," he said hopefully.

In 1932, with international trade in collapse, Franklin Roosevelt denounced Smoot-Hawley as ruinous. Hoover responded that Roosevelt would have Americans compete with "peasant and sweated labor" abroad. Then, as now, protectionism had a strong if superficial political appeal: by election eve, F.D.R. had backed down, assuring voters that he understood the need for tariffs. Protectionist politicking, however, could not save the Republicans in 1932. Smoot and Hawley joined Hoover in defeat. The Democrats dismantled the G.O.P.'s legislative handiwork with caution, using reciprocal trade agreements rather than across-the-board tariff reductions. The Smoot-Hawley approach was discredited. Sam Rayburn, House Democratic Speaker from 1940 until 1961, insisted that any party member who wanted to serve on the Ways and Means Committee had to support reciprocity, not protectionism.

Though some legislators today might be reluctant to make such a promise, no one in Congress is seriously proposing anything as drastic as Smoot-Hawley. Still, the pro-tariff mania that swept Washington 55 years ago remains a danger. "What we are afraid of," says S. Bruce Smart, Under Secretary of Commerce for International Trade, "is that people are so emotional that they will do something that they know is foolish, just to do something."