The Crisis: America Looks Within

It is all too human to look within ones own borders for protection when things turn for the worse. But America became wealthy not from its domestic market but from demand for its goods internationally.

It is the country which more than any other has lectured the world on democratic values that included building the greatest economic empire the world has ever seen. Free trade and freedom were fraternal partners in our red, white and blue world.

How times have changed. It is feasible that the USA will no longer be the free market that it once was for foreign exporters. The US may be preparing to erect trade barriers and willingly man them. This is nationalism borne out of fear. If ever a time existed for neighbours to trust each other and not watch idly by whilst their friends houses burn down, it is now.

As a global economy, we need to act in concert. Congress legislating against free trade can only hurt America and breed further resentment.

Ultimately, should America look inward, there will be other actors willing to take its place. Whether that be the EU, China or a new alliance, who knows? Hopefully cooler heads will prevail and President Obama will exercise a red pen and delete this amendment forever.

Gareth Milliams

Below is a chart and commentary by Casey Research.

February 11, 2009

Plummeting global economies are taking world trade and industrial production along for the ride. No surprise, then, that the IMF projects total world trade to contract 2.8% in 2009. The surprise is the swift and spreading embrace of protectionist policies in reaction to this economic crisis.

Soon to join recent Russian, Indian and Vietnamese tariffs is the “Buy American” clause contained in the forthcoming U.S. stimulus bill. If a mere 2.8% decline in world trade, compared to the 66% drop from 1929 to 1934, can spark the erection of trade barriers, is a rerun of the trade war set off by the U.S. Smoot-Hawley Tariff Act in 1930 far behind?