Historical Effect Of American Protectionism

The period from the end of the 18th century to the year 1934 is always taken as the time of protectionism prevailing in America. With the Manufacturing Industry Report made by Alexander Hamilton, economic nationalism began to play a dominant role and trade protectionism was coming to be in vogue. Traditional trade theory was to be challenged as new industry developed.Once trade protectionism was established in America, its place was deep--rooted, nearly run through the history of American foreign economic relations. It played an important part in the development of American economy and foreign economic relations. Trade protectionism was necessary condition in the success of America industry revolution. It created good external condition for the development of America industry. American industry avoided competition and enjoyed vast market for itself. Because of the limits of natural condition and the development of communications, especially the establishment of comparative advantage trade theory, American trade began to break through the limits of raw materials. America successfully used protective tariff to import raw materials from Latin America and at the same time to open Latin America market.American expansion in foreign market experienced two stages. One was regional expansion stage, opening foreign market by reciprocity trade; the other was global expansion stage, to scrambling for global market by unconditional most-favored-nation treatment. There was always protectionism in the American expansion in the foreign market of. It continually improved America comparative production rate and continually increased America international competition.All these were under the condition of open international economic order. When economic crisis broke out in 1929, protectionism increased in every country, global market went to close, the U.S. moved towards extreme protectionism, production andtrade shrank in world. The dominant position of America protectionism began to end, but it had far-reaching effect in America trade policies in future. In 1934, American trade policy went to the nature of liberalism, and the U.S. began to be global economic leader. The General Agreement of Tariff and Trade established in the 1940s drew the experiences and lessons from extreme protectionism. Whether the mode or principle of solving problem, were out of the criticism of protectionism in this period.