Sound familiar? Today, the United States and much of the rest of the world are at a similar point in the economic cycle. Is the current global financial crisis fated to give way to another decade of darkness — another Great Depression?

It might, if we fail to heed the lessons of history. Although the 1929 crash dealt a severe blow to the world economy, most economists agree that it was not the sole, or even the most important, cause of the economic cataclysm that became known as the Dirty ’30s. The real culprit was rising protectionism, the most notorious example of which was the 1930 U.S. Smoot-Hawley Tariff Act. Smoot-Hawley raised barriers against more than 20,000 imported goods. In retaliation, many other countries slapped higher tariffs on U.S. products. Between 1929 and 1934, the total volume of world trade fell by an estimated two-thirds.

The moral of this story is obvious: in times of economic distress, restricting trade is exactly the wrong thing to do. As United States Federal Reserve Board Chairman Ben Bernanke has observed, studies of the impact of protectionist policies invariably demonstrate that the costs to the rest of society far exceed the short-term benefits to the protected industry. “In the long run,” Mr. Bernanke says, “economic isolationism and retreat from international competition would inexorably lead to lower productivity for U.S. firms and lower living standards for U.S. consumers.”

This is not, by any stretch, a partisan view. Since the Second World War, Democratic and Republican administrations alike have championed open trade as essential for economic growth, employment and poverty reduction. As recently as November, the United States and 19 other leading nations promised to refrain from raising new barriers to trade or implementing other measures inconsistent with the principles of the World Trade Organization (WTO). In their Nov. 15 statement, leaders of the so-called G20 spoke of the “critical importance of rejecting protectionism and not turning inward in times of financial uncertainty.”

Yet today, less than three months later, the United States is contemplating legislation that would directly contravene that pledge. This week, the House of Representatives approved a provision that would bar imported iron and steel from infrastructure projects funded by the $820-billion federal stimulus package. Meanwhile, the Senate is considering a measure that would extend the “Buy America” provision to all goods and services purchased with stimulus money.

Why, given the importance to the United States of open trade and competitive markets, are politicians rushing to erect walls? Former Congressional Speaker Tip O’Neill once famously declared that in the United States, “All politics is local.” Clearly, members of Congress are feeling immense pressure from workers and employers in their home states who are bearing the brunt of the recession. When jobs are threatened, it is natural to blame others.

By the same token, however, it is the job of leaders to rise above parochial politics and focus on the national interest. And it is manifestly not in the interest of the United States to take steps that would inevitably lead to demands for retaliation among workers and companies in other countries. Quite simply, the restrictive trade provisions in the American Recovery and Reinvestment Act would send the wrong signal at the worst possible time to all other countries that are engaged in cooperative efforts to revive the global economy. 

The restrictions are also short-sighted. Canada, for example, shipped roughly $6-billion worth of steel across the border in 2008, while importing $7.3-billion worth of steel from the United States. Slapping a “Buy America” rule on this two-way relationship makes absolutely no sense.

Three weeks from now, President Barack Obama will arrive in Ottawa for talks with Prime Minister Stephen Harper. In announcing the trip, President Obama said that the choice of Canada’s capital for his first foreign visit “is a testament not just to the size of our trading relationship and the closeness of our alliance, but also the strength of our friendship.”

President Obama is right: The ties of friendship between Canada and the United States are strong. So, too, are the commercial linkages between our two countries. Canada and the United States share one of the most integrated economies in the world. Our industries and our workforces are interdependent. Millions of jobs depend on the goods and services that flow back and forth across our shared frontier every hour of every day. 

Now is not the time for the United States to turn its back on its friends and partners, to raise barriers and choke off imports. As the nations of the world work to overcome our shared economic challenges, we need to continue our efforts to open doors of opportunity, not close them. America’s past prosperity was built on free enterprise and open borders. The future prosperity of America and the world rests on our determination to uphold the same bedrock principles. 

Thomas d’Aquino is Chief Executive and President of the Canadian Council of Chief Executives.