Word: protectionists
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There are two basic visions of it. Protectionism, in the free trader's eyes: When an economy gets sick, it wants to withdraw from the world. A protectionist psychosis sets in. The invalid retreats into the house and locks the doors and windows and pulls the shades. Hypochondriac, jittery, paranoid, the economic system settles down to feed upon its own inadequacies. It sits in its slippers by the cold furnace and thinks about how well it used to make things, long ago. It disconsolately guzzles Old Smoot-Hawley, far into the night. Then it passes out. Another economy gone...
...else, the protectionist's happy dream: The prospering American family gathers at its bright windows to peer outside. There, in the dusk, the streets are clogged with trade-crazed foreigners, Brazilians burdened down with shoes, Koreans with shirts, Japanese revving their Hondas, bearing a million videotape recorders on their heads. The foreigners wail and gnash their teeth as they hurl their inventories against the impenetrable American trade barriers. The American economy waves smugly to the rest of the world, then settles in to savor a bit of roast beef and full employment...
Both visions are fantasies, cartoons of the harder, drearier, subtler economic realities. The first is closer to the truth. Unfortunately, the months of recession and traumatic unemployment have begun to attract many Americans to the second vision, the protectionist illusion...
...United Auto Workers have been lobbying hard for a misguided protectionist proposal to require foreign manufacturers to use up to 90% American parts and labor in cars exported to the U.S. It has been estimated the legislation not only might add $3,000 to the price of Japanese cars sold in the U.S. but also would probably destroy more jobs than it would create. The House passed the bill, 215 to 188, but some members claimed it was mainly a symbolic action. "It wouldn't have passed here if people thought it would pass in the Senate," said Massachusetts...
...robust rise of the dollar, which on average gained 11.4% against the world's major currencies, added to the protectionist pressures. As American exports became more and more expensive and therefore less and less competitive in foreign markets, fears of a record trade deficit mounted. A copious influx of foreign capital, some in flight from economic and political instability abroad and some attracted by the high real rates of return in the U.S., held the dollar up. As West European governments kept their own interest rates high in order to stem the outflow of capital, their economies worsened...