《国际政治经济学》文献资料（Political Economy of International Trade：Domestic Politics）Trading Places. Industries for Free Trade.pdf

TRADING PLACES: Industries for Free Trade By HELEN MILNER* INTRODUCTION e e or rom are he m tional attention several times during the 2oth century.In the Io2os,U.S. trade policy made a U-turn.Protectionism had declined from the Dingley tariff bill in 1897 until the Fordney-McCumber tariff law of 1922,as the average value of tariffs on dutiable goods fell from 45 percent to 28 percent.But this downward trend was reversed during the Igzos:be- tween 1922 and 1930,the United States closed its market dramatically, with tariffs attaining an ad valorem average of 53 percent.This level,set by the 1930 Smoot-Hawley tariff,was one of the highest ever,and the highest so far in the zoth century. Beginning in the 193os,protectionism in the U.S.once again abated. The Reciprocal Trade Agreements Act (R.T.A.A.),which was intro- duced in 1934 and served as a model for future trade acts,initiated the opening of the American market.Between 1934 and 1972,average U.S. tariff levels declined by some 7o percent.3 By 1972,tariffs averaged a mere 9.9 percent.+ In the early 1970s,the course of U.S.trade policy again became a source of heated debate.Among the questions that were raised about the future of American trade policy was what direction trade policy would take in the 197os and beyond.Many observers and scholars feared a resurgence of rapidly rising protectionism and international trade wars.5 Extrapolat- *I would like to thank David Baldwin,Jeffry Frieden,Stephen Haggard,Robert Keohane, and the participants at the Ford Foundation Conference on Blending Political and Economic Analysis of International Trade Policies for their helpful comments. 'Robert Pastor,Congress and the Politics of U.S.Foreign Economic Policy (Berkeley:Univer- sity of California Press,198o),Table 3,p.78;David Lake,"International Economic Structures and American Foreign Economic Policy,1887-1934,"World Politics 35 (July 1983),517-43, Table 2,p.534. lbid. 3 U.S.Tariff Commission,Trade Barriers:An Overview,No.665(Washington,DC:G.P.O., 1974,81-82 Pastor (fn.1),Table 6,p.119. s Harald Malmgren,"Coming Trade Wars?"Foreign Policy I (Winter 197o),115-43; C.Fred Bergsten,"The Crisis in US Trade Policy,"Foreign Affairs 49(July 1971),619-35;June

TRADING PLACES: Industries for Free Trade By HELEN MILNER" TODAY, protectionism is once again a central political issue in the United States. Pressures for protectionism have captured the national attention several times during the zoth century. In the 1920s, U.S. trade policy made a U-turn. Protectionism had declined from the Dingley tariff bill in 1897 until the Fordney-McCumber tariff law of 1922, as the average value of tariffs on dutiable goods fell from 45 percent to 28 percent.l But this downward trend was reversed during the 1920s: between 1922 and 1930, the United States closed its market dramatically, with tariffs attaining an ad valorem average of 53 per~ent.~ This level, set by the 1930 Smoot-Hawley tariff, was one of the highest ever, and the highest so far in the zoth century. Beginning in the I~~OS, protectionism in the U.S. once again abated. The Reciprocal Trade Agreements Act (R.T.A.A.), which was introduced in 1934 and served as a model for future trade acts, initiated the opening of the American market. Between 1934 and 1972, average U.S. tariff levels declined by some 70 percent.3 By 1972, tariffs averaged a mere 9.9 percent.4 In the early I~~OS, the course of U.S. trade policy again became a source of heated debate. Among the questions that were raised about the future of American trade policy was what direction trade policy would take in the 1970s and beyond. Many observers and scholars feared a resurgence of rapidly rising protectionism and international trade wars.5 Extrapolat- * I would like to thank David Baldwin, Jeffry Frieden, Stephen Haggard, Robert Keohane, and the participants at the Ford Foundation Conference on Blending Political and Economic Analysis of International Trade Policies for their helpful comments. Robert Pastor, Congress and the Politics of U.S. Foreign Economic Policy (Berkeley: University of California Press, 1980), Table 3, p. 78; David Lake, "International Economic Structures and American Foreign Economic Policy, 1887-1934," World Politics 35 (July 1983), 517-43, Table 2, p. 534. 'Ibid. 3 U.S. Tariff Commission, Trade Barriers: An Oueruiew, No. 665 (Washington, DC: G.P.O., 1974), 81-82. 4 Pastor (fn. I), Table 6, p. I 19. 5 Harald Malmgren, "Coming Trade Wars?" Foreign Policy I (Winter 1970), 115-43; C. Frrrl Bergsten, "The Crisis in US Trade Policy," Foreign Affairs 49 (July 1971)~619-35; June I

INDUSTRIES FOR FREE TRADE 351 ing from previous historical periods of rising and falling protectionism, these analysts expected the 197os and 198os to look much more like the Igzos than like the period between 1934 and 1970.In fact,the 1g2os were offered frequently as the example for the decade after 1973.For many, the threat of a significant closure of the U.S.market evoked a repetition of the dismal interwar years. In this article,I challenge that view of the current period.There were sizable differences in trade policy outcomes between the 192os and the 197os;these differences are puzzling because they belie the predictions of other theories.I maintain that a primary reason for these different policy outcomes was the growth of international economic interdependence after World War II.By the 197os,the expansion of these international economic ties helped to dampen pressures for trade barriers as the pref- erences of industries turned against protectionism.Using evidence from a number of industries in the Ig2os and the 197os,I shall show how the internationalization of firms reduced their interest in protection even in difficult economic times,and thus helped the United States to resist pro- tectionism in the 1970s. THE PUZZLE Two common elements,which distinguish the 192os and the 197os from the intervening years,seem central in this comparison between their trade policies.First,both the 1gzos and the 197os were times of serious economic distress and instability.Such difficult conditions have been seen as a key precondition for rising protectionist activity.One economist noted: It is generally agreed that in a modern industrial economy the cyclical state of the economy and the country's competitive position internationally are the principal determinants of the degree of protectionist pressure.Low lev- els of economic activity,high unemployment,unused capacity,trade defi- cits,rapid increases in imports,and increases in import penetration all op- Kronholz,"Trade and Currency Wars Deepen the Depression,"Wall Street Journal,October 23,I979,P.1. Hegemonic stability theorists have also predicted such a resurgence.See Charles Kindle- berger,The World in Depression,1929-1939(Berkeley:University of California Press,1973), esp.307-8;Robert Gilpin,US Power and the Multinational Corporation (New York:Basic Books,1975),esp.258-62.For more skeptical views,see Stephen Krasner,"State Power and the Structure of International Trade,"World Politics 28(April 1976),317-47;Robert O.Kco- hane,"The Theory of Hegemonic Stability and Changes in International Economic Re- gimes,"in Ole Holsti,Randolph Siverson,and Alexander George,eds.,Change in the Inter- national System (Boulder,CO:Westview Press,1980),131-62

INDUSTRIES FOR FREE TRADE 351 ing from previous historical periods of rising and falling protectionism, these analysts expected the 1970s and 1980s to look much more like the 1920s than like the period between 1934 and 1970. In fact, the 1920s were offered frequently as the example for the decade after 1973. For many, the threat of a significant closure of the U.S. market evoked a repetition of the dismal interwar years. In this article, I challenge that view of the current period. There were sizable differences in trade policy outcomes between the 1920s and the 1970s; these differences are puzzling because they belie the predictions of other theories. I maintain that a primary reason for these different policy outcomes was the growth of international economic interdependence after World War 11. By the I~~OS, the expansion of these international economic ties helped to dampen pressures for trade barriers as the preferences of industries turned against protectionism. Using evidence from a number of industries in the 1920s and the I~~OS, I shall show how the internationalization of firms reduced their interest in protection even in difficult economic times, and thus helped the United States to resist protectionism in the 1970s. Two common elements, which distinguish the 1920s and the 1970s from the intervening years, seem central in this comparison between their trade policies. First, both the 1920s and the 1970s were times of serious economic distress and instability. Such difficult conditions have been seen as a key precondition for rising protectionist activity. One economist noted: It is generally agreed that in a modern industrial economy the cyclical state of the economy and the country's competitive position internationally are the principal determinants of the degree of protectionist pressure. Low levels of economic activity, high unemployment, unused capacity, trade deficits, rapid increases in imports, and increases in import penetration all opKronholz, "Trade and Currency Wars Deepen the Depression," Wall Street Journal, October 23, 19793 P 1. Hegemonic stability theorists have also predicted such a resurgence. See Charles Kindleberger, The World in Depression, 1929-1939 (Berkeley: University of California Press, 1973)~ esp. 307-8; Robert Gilpin, US Power and the Multinational Corporation (New York: Basic Books, 1975)~ esp 258-62. For more skeptical views, see Stephen Krasner, "State Power and the Structure of International Trade," World Politics 28 (April 1976), 317-47; Robert 0.Keohane, "The Theory of Hegemonic Stability and Changes in International Economic Regimes," in Ole Holsti, Randolph Siverson, and Alexander George, eds., Change in the International System (Boulder, CO: Westview Press, 1980), 131-62

352 WORLD POLITICS erate to increase the temptation to protect domestic industries from import competition. Economic difficulties were similar in the two periods,which were marked by relatively high unemployment rates and sizable agricultural and industrial overcapacity.In the I9zos and early 193os,the U.S.econ- omy suffered two major downturns-one in 1920-1923 and one in 1929- 1933.Price deflation,labor unrest,and international monetary problems created further economic instability.7 In the 197os,the U.S.economy ex- perienced deep recessions during 1973-1975 and 1978-1982.Sparked by the oil shocks,these recessions were aggravated by rapidly shifting trade patterns,price instability,and a confused international monetary situa- tion.These high levels of economic distress and instability that were felt in the 1g2os and 197os might be expected to generate similar widespread protection. Indeed,in view of the absolute levels of economic distress during the two periods,the 197os might have generated even greater levels of mar- ket closure than the Igzos.s The averages for three major economic in- dicators all are worse in the 197os than in the Igzos,as Table I indicates. TABLE I AVERAGES FOR THREE MAJOR ECONOMIC INDICATORS (percent) 1923-1929 1973-1979 Average annual growth in real GNP 3.1 2.3 Average mean value of unemployment rate 3.5 6.8 Average value of non-residential fixed investment to GNP 11.2 10.2 All data from Feldstein (fn.7),104-5. Wendy Takacs,"Pressures for Protectionism:An Empirical Analysis,"Economic Ingteiry 19(October 1981),687-93,at 687.In general,see Timothy McKeown,"Firms and Tariff Re- gime Change:Explaining the Demand for Protectionism,"World Politics 36 (January 1984), 215-33;Giulio Gallarotti,"Toward a Business Cycle Model of Tariffs,"International Organi- zation 39(Winter 1985),155-87;Susan Strange and Roger Tooze,eds.,The International Pol- itics of Surplus Capacity (London:Butterworths,1980). 7 W.Arthur Lewis,Economic Survey,1919-1939 (London:Allen Unwin,1949);U.S.De- partment of Commerce,Survey of Current Business,various issues,1919-1930 (Washington, DC:G.P.O.);U.S.Census Bureau,Historical Statistics of the U.S.,Colonial Times to the Present (Washington,DC:G.P.O.,1975);Kindleberger (fn.5),esp.chaps.5-8;League of Nations, Economic Fluctuations in the U.S.and U.K.,1918-1942 (Geneva:League of Nations,1942); Martin Feldstein,ed.,The American Economy in Transition(Chicago:National Bureau of Eco- nomic Research,1980),12. s Sidney Ratner,James Soltow,and Richard Sylla,The Evolution of the American Economy

352 WORLD POLITICS erate to increase the temptation to protect domestic industries from import c~mpetition.~ Economic difficulties were similar in the two periods, which were marked by relatively high unemployment rates and sizable agricultural and industrial overcapacity. In the 1920s and early I~~OS, the U.S. economy suffered two major downturns--one in 1920-1923 and one in 1929- 1933. Price deflation, labor unrest, and international monetary problems created further economic instability.? In the I97OS, the U.S. economy experienced deep recessions during 1973-1975 and 1978-1982. Sparked by the oil shocks, these recessions were aggravated by rapidly shifting trade patterns, price instability, and a confused international monetary situation. These high levels of economic distress and instability that were felt in the 1920s and 1970s might be expected to generate similar widespread protection. Indeed, in view of the absolute levels of economic distress during the two periods, the 1970s might have generated even greater levels of market closure than the 1920s.~ The averages for three major economic indicators all are worse in the 1970s than in the 192os, as Table I indicates. TABLEI AVERAGES FOR THREE MAJOR ECONOMIC INDICATORS (percent) 1923-1 929 1973-1979 Average annual growth in real GNP Average mean value of unemployment rate Average value of non-residential fixed investment to GNP All data from Feldstein (fn.7), 104-5. Wendy Takacs, "Pressures for Protectionism: An Empirical Analysis," Economic Inquiry 19 (October 1981), 687-93, at 687. In general, see Timothy McKeown, "Firms and Tariff Regime Change: Explaining the Demand for Protectionism," World Politics 36 (January 1984), 215-33; Giulio Gallarotti, "Toward a Business Cycle Model of Tariffs," International Organization 39 (Winter 1985), 155-87; Susan Strange and Roger Tooze, eds., The International Politics of Surplus Capacity (London: Butterworths, 1980). 7 W. Arthur Lewis, Economic Survey, 1919-1939 (London: Allen & Unwin, 1949); U.S. Department of Commerce, Survey of Current Business, various issues, 1919-1930 (Washington, DC: G.P.O.); U.S. Census Bureau, Historical Statistics of the U.S., Colonial Times to the Present (Washington, DC: G.P.O., 1975); Kindleberger (fn. 5), esp. chaps. 5-8; League of Nations, Economic Fluctuations in the U.S. and U.K., 1918-1942 (Geneva: League of Nations, 1942); Martin.Feldstein, ed., The American Economy in Transition (Chicago: National Bureau of Economic Research, 1980), 12. Sidney Ratner, James Soltow, and Richard Sylla, The Evolution of the American Economy

INDUSTRIES FOR FREE TRADE 353 Since the U.S.economy performed more poorly in the 197os,one might expect that,if economic difficulty were a precursor to protectionism,this period should have experienced protectionism with a vengeance. A second similarity between the 19zos and 197os that has been linked to protectionism is the declining power of the world's hegemonic state. This change in the international distribution of power has been cited as a major factor leading to the closure of the world's markets.Robert Gilpin has stated that Today,...the dominant economy is itself in relative decline and is being challenged by rising centers of economic power.With the decline of the dominant economic power,the world economy may be following the pat- tern of the late nineteenth century and of the 1g3os:it may be fragmenting into regional trading blocs,exclusive economic alliances,and economic na- tionalism. In the 1920s,Great Britain,the hegemon of the Igth century,was los- ing its status.From a peak of 24 percent in 1870,Great Britain's share of world trade had fallen to 14 percent before World War I.Furthermore, its share of the world's manufacturing output tumbled from a dominant 32 percent in 1870 to a third-rate level of 14 percent in 1913."Germany and the United States overtook it in industrial competitiveness in certain critical,advanced sectors."+In addition,Britain's control over the inter- national monetary system was declining.Its problems in returning to and maintaining the gold standard in the 1gzos and its final abandonment of that system in 193I signaled this loss of influence.3 By the Iozos,then, Britain's hegemony had seriously eroded. The situation was fairly similar in the 197os.By the early part of the decade,the global dominance that the United States had exercised in the 195os and 196os had been reduced as other nations mounted a challenge. (New York:Basic Books,1979),482,502-3.The worst economic difficulties of the Great Depression followed(rather than preceded)the tariff increases,occurring in the early 1930s: unemployment averaged 3%in 1930,the year Smoot-Hawley was passed,but rose to 25%by 1933,the year before the Reciprocal Trade Agreements Act. Gilpin (fn.5),258-59.Also see Kindleberger (fn.5),esp.307-8;Krasner (fn.5),317-47; Keohane(fn.5),131-62;David Lake,"Structure and Strategy:The International Sources of American Trade Policy,1887-1939"(Ph.D.diss.,Cornell University,1983);Charles Kindle- berger,"Dominance and Leadership in the International Economy,"International Studies Quarterly 25 (June 1981),242-54;Robert Gilpin,War and Change in World Politics (Cambridge: Cambridge University Press,1981). Lake (fn.I),Table I,p.525. "Ratner,Soltow,and Sylla (fn.8),385. Lake (fn.1);Alexander Gerschenkron,Economic Backwardness in Historical Perspective (Cambridge:Harvard University Press,1962),chaps.I and 2;Samuel Hays,The Response to Industrialism,1885-1914 (Chicago:University of Chicago Press,1957),chaps.1,7,8. Robert O.Keohanc and Joseph S.Nye,Ir.,Power and Interdependence:World Polities in Transirion (Boston:Little,Brown,1977),70;Kindleberger (fn.)63-68,146-70

INDUSTRIES FOR FREE TRADE 353 Since the U.S. economy performed more poorly in the 1970s, one might expect that, if economic difficulty were a precursor to protectionism, this period should have experienced protectionism with a vengeance. A second similarity between the 1920s and 1970s that has been linked to protectionism is the declining power of the world's hegemonic state. This change in the international distribution of power has been cited as a major factor leading to the closure of the world's markets. Robert Gilpin has stated that Today, ... the dominant economy is itself in relative decline and is being challenged by rising centers of economic power. With the decline of the dominant economic power, the world economy may be following the pattern of the late nineteenth century and of the 1930s: it may be fragmenting into regional trading blocs, exclusive economic alliances, and economic nationalism.9 In the 192os, Great Britain, the hegemon of the 19th century, was losing its status. From a peak of 24 percent in 1870, Great Britain's share of world trade had fallen to 14 percent before World War I.lo Furthermore, its share of the world's manufacturing output tumbled from a dominant 32 percent in 1870 to a third-rate level of 14 percent in 1913." Germany and the United States overtook it in industrial competitiveness in certain critical, advanced sectors.I2 In addition, Britain's control over the international monetary system was declining. Its problems in returning to and maintaining the gold standard in the 1920s and its final abandonment of that system in 1931 signaled this loss of influence.13 By the 192os, then, Britain's hegemony had seriously eroded. The situation was fairly similar in the 1970s. By the early part of the decade, the global dominance that the United States had exercised in the 1950s and 1960s had been reduced as other nations mounted a challenge. (New York: Basic Books, 1979), 482, 502-3. The worst economic difficulties of the Great Depression followed (rather than preceded) the tariff increases, occurring in the early 1930s: unemployment averaged 3% in 1930, the year Smoot-Hawley was passed, but rose to 25% by 1933, the year before the Reciprocal Trade Agreements Act. vGilpin (fn. 5), 258-59. Also see Kindleberger (fn. 5), esp. 307-8; Krasner (fn. 5), 317-47; Keohane (fn. 5), 131-62; David Lake, "Structure and Strategy: The International Sources of American Trade Policy, 1887-1939" (Ph.D. diss., Cornell University, 1983); Charles Kindleberger, "Dominance and Leadership in the International Economy," Intevzational Studies Quarterly 25 (June 1981),242-54;Robert Gilpin, War and Change in World Politics (Cambridge: Cambridge University Press, 1981). 'O Lake (fn. I), Table I, p. 525. " Ratner, Soltow, and Sylla (fn. 8), 385. "Lake (fn. I); Alexander Gerschenkron, Economic Bac&uardness in Historical Perspective (Cambridge: Harvard University Press, 1962), chaps. I and 2; Samuel Hays, The Response to Industrialism, 1885-1914(Chicago: University of Chicago Press, 1957)~chaps. I, 7, 8. '3 Robert 0.Keohane and Joseph S. Nye, Jr., Power and Interdependence: World Politics in Transition (Boston: Little, Brown, 1977)~70; Kindleberger (fn. 5),63-68, 146-70