Smoot-Hawley...It's Baaaack! Will It Infest Tech And Destroy The Economy?

| Contact Center/CRM Views and Analysis

Smoot-Hawley...It's Baaaack! Will It Infest Tech And Destroy The Economy?

The ghost of Smoot-Hawley is baaack...and it is a real horror that spread misery worldwide, and could do again unless elected officials have the guts to drive a stake in its latest resurrection.

Smoot-Hawley is shorthand for the infamous tariff brought in the honorable Senator Reed Smoot from Utah and the honorable Representative Willis Hawley from Oregon, both Republicans, signed by GOP President Herbert Hoover in 1930. Infamous because economists then warned the President that that passage would worsen what became the Great Depression, and they were right, for it sparked a zero sum trade war whose net outcome left even those who would benefit with less and in too many cases with nothing.

The spirits of Sen. Smoot and Rep. Hawley appear to have taken over the bodies of North Dakota Senator Byron Dorgan from North Dakota and Representative Peter Visclosky of Indiana, this time both Democrats. Sen. Dorgan is sponsoring the "American-made" rule for construction and other equipment that would be used in the economic stimulus program, which funds public works, water, transportation and other construction projects as well as broadband communications deployments and energy research. Rep. Visclosky has strengthened the Buy American portions for steel in the recently-passed House version of the legislation.

Yes, protectionist measures are not new, trade agreements or no trade agreements. That's why non-U.S. firms like Bombardier have built manufacturing plants to comply with Buy America for transit equipment, at costs passed onto American taxpayers.

Yet steel especially, that's another matter. This is the raw nerve of industry--the European Union was originally set up to permit free trade in it--(in a 'past life' I had covered the steel trade), and a fair portion of the truly precious metal comes from Canada and other countries.

Mess with steel and you mess with other valuable commodities that come from other trade partners, like oil. You can bet that Canadian Prime Minister Stephen Harper will mention that one to President Obama in person when he visits Canada Feb.19. If not Mr. Harper's rival, Liberal leader Michael Ignatieff, will make sure the country will know it, based on reading a recent Toronto Star article:

'"We're not small beer here. We're the United States' largest energy supplier, not just oil, but also hydro, and they've got to understand that if they want energy security they shouldn't start putting up barriers to our goods and services,' " he told Global TV's Focus Ontario in an interview.

"'We don't need to talk about threats, but they need to understand, and this will be a message I will pass to the president, that we're a force to be reckoned with.'"

Here's the real nightmare: Smoot/Hawley (or Dorgan/Visclosky) spreading to other infotech. Does the U.S. really want to go there? After all silicon is to Silicon Valley what steel is to Gary...

There are creeping signs that this sector may be next, with contact centers as the thin edge of the wedge. As reported in the January issue of Customer Interaction Solutions, federal lawmakers may reintroduce a bill similar to H.R. 1776, The Call Center Consumer's Right to Know Act, which would require contact center agents to disclose the physical location of such employee at the beginning of inbound and outbound calls. Firms would also have to annually certify to the Federal Trade Commission (FTC) their compliance with such requirement.

H.R.1776 is an attempt to restrict offshoring by making customers aware that their calls may be going to or originating out of country. The bill's supporters hope customers and negative publicity would pressure firms to bring such jobs back to the U.S.

The downsides are that such bills may significantly add to contact center costs in both onshoring and time spent location disclosing and in compliance, which would ultimately be paid for by consumers. In doing so bills like it that hike contact center expenses may also be self-defeating as they may result in fewer domestic jobs.

"The particular type of disclosure contemplated by H.R. 1776 is a burdensome additional disclosure without clear benefit to the consumer," American Teleservices Association (ATA) CEO Tim Searcy told the House Energy and Commerce subcommittee Sept.11, 2008. "Each time additional disclosures or compliance requirements are added to the call, call lengths are increased, and the cost of doing business by phone increases and the quality of the interaction with the consumer declines. The rising costs of compliance and regulation are causing many firms to contemplate automation only, or offshore solutions to stay cost competitive."

President Obama knows his history and the current economic and political realities and has signaled that he is no Herbert Hoover. He understands the pain being felt by the constituents of the likes of the two elected officials pushing for those measures. But he depends on the cooperation of Congress to get his stimulus package approved ASAP.

Are there enough elected Congressmen and Senators who are wise enough to set aside their specific interests to look after the greater good and avoid a near-repeat of history that will hurt even those who short-term benefit from protectionist measures?

Feedback for Smoot-Hawley...It's Baaaack! Will It Infest Tech And Destroy The Economy?

1 Comment

How is unfettered free trade good for americans? Its only good for the gready un-american multinationals. Free trade is not good for small business or the American worker. When will we all wake up and protect the american way of life!!

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