However, the Southern states soon turned against it because of their interests in importing superior quality British manufactures and because of the failure of the industries to emerge in their own territories.[65]
The Southern agrarian interests, with the help of the New England (and especially New York) shippers, were able to defeat bills calling for higher tariffs in 1820, 1821 and 1823.[66] However, in 1824, a new, still higher, tariff was enacted. In 1828 the so-called Tariff of Abominations further divided the country. This was because this time the northern and western agricultural interests were adding high tariffs on the raw materials or low value-added manufactures that they produced (e.g., wool, hemp, flax, fur and liquor), thus creating tension with the New England manufacturing states.[67]
Yet another tariff law was passed in 1832. This offered a 40 per cent tariff rate on average for manufactured goods – a much lower cut than the Southerners had wanted – and particularly high protection was accorded to iron and textile goods (e.g., 40—45 per cent on woollen manufactured goods and 50 per cent for clothing). This led to the so-called Nullification Crisis, started by South Carolina’s refusal to accept the law. A compromise bill was passed in 1833, which offered few immediate reductions but made a provision for gradual reduction over the next ten years, down to about 25 per cent for manufactured goods and 20 per cent for all goods. However, as soon as this ten-year reduction ended in 1842, a new tariff act was passed, raising duties back up to about the 1832 levels.[68]
There was a reduction in protection in the 1846 tariff law, although the average
However, the tension surrounding both the tariff and slave issues persisted between North and South, and finally culminated in the Civil War (1861-5). The Civil War is commonly thought to have been fought solely over the issue of slavery, but in fact tariffs were another important issue. Garraty and Carnes state that ‘raj war against slavery would not have been supported by a majority of Northerners. Slavery was the root case of secession but not of the North’s determination to resist secession, which resulted from the people’s commitment to the union’.[71] Given that the South had seen tariffs as the major existing liability of the union while the abolition of slavery was still only a theoretical possibility, the importance of the tariff issue in causing the secession cannot be over-emphasized.
Lincoln’s victory in the presidential election of 1860 would have been very difficult, if not impossible, had the leading protectionist states of Pennsylvania and New Jersey not switched their allegiance to the Republican Party thanks to its election pledge to maintain increased protection.[72] The pledge (the ‘twelfth plank’ of the platform) was deliberately worded ambiguously in such a way as to assuage the free-trade element in the Party.[73] At the same time, it was still acceptable to the protectionist states, given that Lincoln was a ‘true blue protectionist’ and thus seen as someone who would live up to the spirit of the pledge, once elected.[74]
Early in his political career Lincoln had been a leading member of the hard-line protectionist Whig party and an enthusiastic follower of the charismatic politician, Henry Clay. Clay advocated the ‘American System’, .which consisted of infant industry protection (‘Protection for Home Industries’) and infra structural development (‘Internal Improvements’), in explicit opposition to the ‘British System’ of free trade, and Lincoln fully shared his view.[75] Although during the campaign Lincoln was compelled to keep quiet on most of the controversial issues, including tariffs, in order to hold a diverse and young party together[76], he unwaveringly gave assurance of his protectionist belief when it was deemed necessary.[77]
Although he was consistently anti-slavery, Lincoln had never before advocated forceful abolition of slavery; he considered blacks racially inferior, and was against black suffrage. Given this, there was probably less to fear for the South on the slavery front than on the tariff front upon his election. Indeed, even in the early days of the Civil War, Lincoln made it clear that he was quite willing to allow slavery in the Southern states in order to keep the Union together. He enacted slave emancipation in the autumn of 1862 as a strategic move to win the war rather than out of moral conviction.[78]
In 1862, a new tariff act was introduced. It was disguised as ‘compensation’ for the increased excise tax and the emergency income tax during the Civil War, in order that the previous margin of protection could be maintained. This raised the rates to ‘their highest level in thirty years – much higher, in many cases, than the new excise taxes warranted’[79] In 1864, tariffs were raised still further, to their highest ever rates, to meet the demands of war expenditure; they remained at those levels after the war, although other internal taxes were repealed.[80] In this way, the victory of the North in the Civil War ensured that the USA remained the most ardent practitioner of infant industry protection until the First World War, and even until the Second World War – with the notable exception of Russia in the early twentieth century (see Table 2.1).[81]
In 1913, following the previous Democratic electoral victory, the Underwood Tariff bill was passed, leading to ‘a large increase in the categories of goods allowed free entry and to a substantial drop in average import duties’;[82] this reduced the average tariff on manufactured goods from 44 per cent to 25 per cent. However, the onset of the First World War made this bill ineffective and a new emergency tariff legislation was put in place by 1922, following the Republican return to power in 1921. In the 1922 law, although the tariffs did not return to their high 1861-1913 levels, the percentage effectively paid on manufactured imports rose by 30 per cent.[83]
Following the start of the Great Depression there came the 1930 Smoot-Hawley tariff – ‘the most visible and dramatic act of anti-trade folly’, according to Bhagwati.[84] However, this characterization is very misleading. While the Smoot-Hawley tariff provoked an international tariff war, thanks to its bad timing – especially given the new status of the USA as the world’s largest creditor nation following the First World War – it did not constitute a radical departure from the country’s traditional trade policy stance.[85]
In fact, the Smoot-Hawley tariff only marginally increased the degree of protectionism in the US economy. As we can see from table 2.1, the average tariff rate for manufactured goods that resulted from this bill was 48 per cent, which still falls within the range of the average rates that had prevailed in the USA since the Civil War, albeit in the upper region of this range. It is only in relation to the brief ‘Liberal’ interlude of 1913-29 that the 1930 tariff bill can be interpreted as increasing protectionism, although even then it was not by very much. Table 2.1 shows that the average rate of tariff on manufactures in 1925 was 37 per cent and rose to 48 per cent in 1931.
It was only after the Second World War that the USA – with its industrial supremacy unchallenged – finally liberalized its trade and started championing the cause of free trade. However, it should be noted that the USA never practised free trade to the same degree as Britain did during its free-trade period (1860 to 1932). It never had a zero-tariff regime like that of the UK, and it was much more aggressive in using ‘hidden’ protectionist measures. These included: VERs (voluntary export restraints); quotas on textile and clothing (through the Multi- Fibre Agreement); protection and subsidies for agriculture (compare this with the repeal of the Corn Laws in Britain); and unilateral trade sanctions (especially through the use of anti-dumping duties).[86]
In contrast to the attitude of a generation ago, represented by the above-mentioned work of North, there is now a growing recognition of the importance of protectionism among US economic historians, who used to be extremely wary of saying anything positive about it. Today, there seems at least to be a consensus that tariff protection was critical in the development of certain key industries, such as the textile industry in the early nineteenth century and the iron and steel industries in the second half of the nineteenth century.
