This may be stating the obvious, but a federal bailout for the auto industry wouldn’t just affect the three troubled companies in question. It also would affect their competitors, which employ hundreds of thousands of American workers. And, Dartmouth business professor Matthew Slaughter argues in today’s Wall Street Journal, it would hurt other U.S. companies and their workers by making the U.S. a less attractive place to invest:

Will fewer companies look to insource into America if the federal government is willing to bail out their domestic competitors?

The answer is an obvious yes. Ironically, proponents of a bailout say saving Detroit is necessary to protect the U.S. manufacturing base. But too many such bailouts could erode the number of manufacturers willing to invest here.

Slaughter says that a U.S. bailout of General Motors, Ford and Chrysler could lead other governments to prop up failing, but politically powerful, firms. That’s likely to hurt some of America’s most successful comopanies, he adds:

Will a U.S.-government bailout go ignored by policy makers abroad?

No. A bailout will likely entrench and expand protectionist practices across the globe, and thus erode the foreign sales and competitiveness of U.S. multinationals. And that would reduce these companies’ U.S. employment, R&D and related activities. That would be bad for America.

It’s widely agreed that the Smoot-Hawley tariff touched off a trade war that deepened and prolonged the Great Depression of the 1930s. Could industrial bailouts be the Smoot-Hawley of the new century? It’s a scary prospect.