A new world of trade protectionism?
Very unlikely; here's why.
First off
Smoot–Hawley Tariff Act of 1930 raised U.S. tariffs on over 20,000 imported goods to record levels. The ensuing retaliatory tariffs by U.S. trading partners around the world
reduced American exports and imports by more than half and according to some economists was one of the most salients contributions to the severity of the Great Depression.
Perhaps that's one reason why we really have not really seen much protectionism in the current Great Recession. If this were to happen, you would have seen in much more of it last year at the height of the downturn; not now that the world is in recovery mold.
Now take a look at how the world has changed in the past 80 years,
Today we "manufacture" in a system called a "
supply chain management."
Like Apple's iPod. Designed and managed in California, many of its higher tech parts are made in places like Taiwan and then shipped into China where they're assembled. The finished iPod is than classified as a "re-export" by China. Indeed, the 'making" of 5th generation iPod accords only about $7 dollars to China.
So what's a Chinese product? Or an American car? Since the 1980s, American cars have a lot of labor input via
maquiladora plants set up across the border in Mexico.
In 1935, you could buy a purely Detroit made American car. Not today. Across a slew of manufactured goods, the making of the product uses Japanese "just-in-time" procedures which have evolved into a products that have inputs and labor from a host of countries as manufacturers have reduced costs to gain competitive advantage.
Boeing's Dreamliner farms out 70 percent of the its work to nearly 50 partners and top-tier suppliers at 135 sites spanning four continents.
So stricter U.S trade protection legislation would actually
increase costs to American manufacturers as it would result in a greater percentage of iPods and iPhones being made solely by U.S. content. Increased manufacturing costs would make U.S. products less competitive, resulting in a loss of market share which would
ensure more US job losses down the road.
What American company would lobby for that?
Would Apple? As I write, they just released their Q1 ‘10 financials with their all-time record revenue: 50% increase in profits on revenue of $15.68 billion (year-ago quarter $11.88 billion).
And politically, if the Obama administration is now weaker, how could they ramrod such legislation down a determined Republican throats?
As The Economist observes:
"The brief era in which the Democrats felt they could push through anything they wanted, courtesy of their thumping majorities in the House and the Senate and their occupancy of the White House, is over."
And while Obama slapped tariffs on Chinese tires last year, to date the current Administration has pretty much practiced pro free trade policies. Yes getting jobs is policy numero uno for Obama; restricting free trade is one of last things that would do that.
The only plausible event I can see 'out there' that could turn back the clock on global economy, are the Peak Oil ideas posited by Jeff Rubin in his new book.
Why Your World is About to Get a Whole Lot Smaller: Oil and the End of Globalization.
You can read about that here.
There are a lot of reasons to be bullish on rare earths. It's hard to see increased trade restrictions as one of them.
And as for returning the US to its " former manufacturing glory" the idea is to move up the chain and manufacture increasingly complex and high tech stuff.
Oh, and today the U.S. is still the largest manufacturer on the planet.
I could see case made where the U.S might acts to ensure 'strategic access' to REEs with military applications. But that would be independent of any trade sanctions. It would probably involve policies favoring the development of non-Chinese sources of REEs. And my guess it would greatly benefits those who hold compliant reserves on US soil.
Like a REE deposit in northeastern Wyoming.