New York Times: It's No Time for Protectionism Greg Mankiw
Just before his confirmation as Treasury secretary, Timothy F. Geithner turned up the heat on the Chinese regarding the dollar-yuan exchange rate. President Obama, he said, "believes that China is manipulating its currency. Countries like China cannot continue to get a free pass for undermining fair-trade principles."
Like many economists, I cringe whenever I hear the term "fair trade." It is not that I am against fairness — who is? — but the word "fair" is so amorphous in this context as to defy definition. Most often, the slogan "fair trade" is little more than a rallying cry for protectionism. …
… This may be a good time to recall the legacy of Senator Reed Smoot of Utah and Representative Willis Hawley of Oregon, both Republicans. The 1930 tariff bill that bears their name did not cause the Great Depression, but it contributed to a plunge in world trade and undoubtedly was a step in the wrong direction.
As we sort through the wreckage of our own financial crisis, a retreat into economic isolationism is one mistake we want to be sure not to repeat.
One of the most troubling things I heard from Obama during the campaign, which was given minimal press coverage, was his strong affinity for protectionism. I have been hoping the recent financial crisis would cool his jets on this. The evidence is to the contrary. This does not bode well for the world economy and the poorest of the world's poor.
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