Is the GOP Really the Party of Free Trade?

With apologies to Samuel Johnson, in 2008 protectionism has replaced patriotism as the last refuge of the scoundrel.

This is nothing new, of course; the world did not suddenly go flat when Al Gore invented the Internet. Even a cursory examination of trade history reveals the stresses, strains, and discontents of globalization to be a very old story indeed. For the past several thousand years, mankind has been trading an ever-increasing volume and variety of goods over ever-longer distances. This in turn has produced winners and losers aplenty, providing kings and ministers ample opportunity to appeal to those disaffected by the process.

In the late seventeenth century, for example, the English East India Company (EIC) flooded Britain with colorful, lightweight, comfortable, and relatively inexpensive Indian calicoes. Thousands wool weavers, put out of work by competition from the cheap Asian imports, rioted outside EIC headquarters and Parliament; the latter responded by forbidding the offending textiles.

A century later, when the Tea Act of 1773 allowed the EIC to import that product directly into the colonies, delighting Americans with drastically lower prices for their favorite beverage. But not everyone was happy; smugglers and middlemen, their livelihoods destroyed by the Act, donned blankets and war paint and threw the Boston Tea Party. A protest against taxation without representation by patriot heroes? Hardly. It was the first American anti-globalization riot.

Nor were Senators Clinton and Obama the first presidential politicians to make protectionist political hay; in 1860 Abraham Lincoln, who in fact cared little for trade policy, captured the presidency by shamelessly pandering to anti-free-trade sentiment in Pennsylvania, New Jersey, and New England. For almost a century after, the GOP was the party of protection, as one Republican administration after another raised import duties, culminating in the disastrous tariff promised by Herbert Hoover to voters in the 1928 election -- the infamous Smoot-Hawley Act.

In 2008, the presumptive Democratic nominee is highly intelligent, highly trained, and advised by some of the nation's finest economic minds. As evidenced by the winks and nods in the direction of Canadian officials, he also knows full well that the nation as a whole benefits from free trade, even if substantial minorities are harmed by it.

Those who are unimpressed with the theoretical arguments of the modern followers of Adam Smith and David Ricardo should at least consult the empirical economic literature. There, they will find ample evidence of the real-world blessings of open markets. Typical is a study by Jeffrey Sachs, who is no one's free-market ideologue. In a landmark 1995 paper, he and coworker Andrew Warner examined the late-twentieth-century experience with trade barriers. They began by categorizing nations by their postwar trade policies. Two lists stand out: those that have always had reasonably open trade policies, and those that have always been highly protectionist; in 2006 the average per capita GDPs for these two groups were $17,521 and $2,447, respectively.

As aware as Senator Obama must be of this sort of data, he is also equally aware that there are votes to be had from exploiting the fear and anger of those left behind by the process. The challenge, then, is not what further tariff reductions, if any, to implement -- most of heavy lifting was in fact done in the decade after 1945 in the first GATT rounds -- but rather how to guarantee the undeniable benefits of free trade by bringing on board its inevitable victims.

As goods and services whiz ever more rapidly around the globe, all nations experience growth in wealth and employment. Unfortunately, this trade-induced orgy of Schumpeterian creative destruction leaves many out of work temporarily, and a few permanently.

No wealthy nation can afford to throw to the wolves those whose jobs can be so easily "exchanged" in an increasingly frictionless global economy. Which is precisely what Senator McCain, nominally this year's free-trade candidate, would do. In the prosperous, globally oriented economies of the developed world, free trade without a generous safety net is a self-defeating oxymoron -- a surefire prescription for a protectionist backlash that will rapidly erode support for open markets (a concept far more familiar to Europeans than to Americans). It is no accident that those wealthy nations that depend most heavily upon free trade -- think Canada and northern Europe -- also have the most extensive social welfare systems.

So if you're a protectionist, vote Republican, which, until Eisenhower was the traditional party of tariffs anyway. And if you're a free trader, Barack will do just fine, thank you. His clear panders in Ohio, Pennsylvania, and Michigan aside, the presumptive Democratic nominee clearly understands the benefits of open markets, and aims to put in place a national health care system and to increase unemployment, welfare, educational, and retraining benefits -- programs which will go a long way to blunting calls for protection from those who miss or fall off the globalization train.

Comments

[William Bernstein - Huffpost Blogger]

See William Bernstein's Profile

Hi all:

Your posts nicely illustrate the misconceptions, fallacies, and frank errors of fact surrounding the issue of trade policy:

1) "There is no such thing as free trade." By any equally rigid definition, there is no such thing as free speech"you can"t shout "fire" in a crowded theater nor incite to murder. And, obviously, I know of no one who suggests that "free trade" equates to "allow in unsafe products."

2) I see a lot of name-calling and invective, and absolutely no data. If any of the posters can cite any peer-reviewed published data showing that free trade has been detrimental to economic growth in the twentieth century, I would love to see them.

3) By posters" logic, all manufacturing should migrate to Haiti, where workers earn less than $1 per hour. There are numerous industries where the US leads the pack: aircraft, pharmaceuticals, financial services, entertainment, medical equipment, software engineering, and, oh yes, I almost forgot, agriculture. I don"t see these jobs migrating to Haiti, or even Mexico.

4) The problem, as I see it, is that none of the posters can imagine what a protectionist world looks like. I suggest a few brief mental exercises: First, read about Smoot-Hawley and the 1930s. Then, read about what happened to India"s economic history in the aftermath of its autarky in the 1950s-1980s, and then what happened after they opened up their economy.

5) For the record, I"m a registered Democrat.

William Bernstein

[hipnoticpsycosis]

This man obviously has a lot of money invested in companies that use free trade to get cheap labor. all free trade dose for America is lower our wages and he dose not care because he is making his money off of slave labor. Well not exactly. See he's trying to sway public opinion with embellished statements. So he dose care. It is brining in money for the wealthy but not Americas normal worker. It actually makes it impossible for us to compete in a global market. The only we could compete is if we were happy with 1 dollar for a week of work or our dollar was worth very little. I just hope nobody out there is using this mans propaganda to judge how the world works.

[Henry]

There is a really shattering point to "free trade" when its the fruition of its excercise is achieved. That is that there is no longer any need for borders. You've read about the sly and devious George (our beloved commander in chief) in talks with Canada and Mexico... kiss that affectation of "Patriotism" good--bye! When there is free trade there is no need for borders. Products and workers both homogenized. The corporate state of Globalism with decisions made in boardrooms, not about people, but about profits. It's where we are headed.

[wilburr0g]

What a load of tripe. After seeing the middle class devastated by a rapidly accelerating race to the bottom, it's pretty clear the only beneficiaries of the current infatuation with 'Free Trade' at any cost are predatory CEO's - whose greatest enemy seems to be an employee with a decent wage. Now please stop shilling for the big corporations

[americaforme]

Free Trade is not free...Yes, I get it, that Repugs,are not the only bad guy here..Democrats were out to lunch, when NAFTA,was pushed through congress...By the same token Unions laided down and died...Global was allready on the table, for unions money hungry plan...Billy Boy out foxed himself on this one.Congressional people think the average Joe cant figure this thing out...Nada...Middle America is wide awake now, keeping a long hard look on Obama, and Mcain, chumming up with Hillary will have major problems...NAFTA is still hot on our anti global mind...Obama is still under intense scrunity. I am waiting to see him flip on global.

[Bobleblah1]

How many neo-Liberal clowns does it take?

[donkat]

Who is this idiot? More Rethug logic...round and round and comes out wrong. How beneficial to the people has the free trade system we now find ourselves been, anyway. Now, more than ever, we need what you people call "entitlement" programs like a national health care system and educational benefits - not tax cuts for the wealthy (the ultimate entitlement program.) And, for the record, Canadians love their health care system.

And, let's not even talk about exploiting fear of any sort - that's the rethugs calling card.

[Rule Of Law]

Reading this was like getting a mental colonoscopy!

[bgregs]

Mr. Bernstein,

You speak of the benefits of free trade, but forget to mention two minor details:

1) Free trade cannot exist between unequal partners

2) there is no such thing as Free Trade.

In the first case, when you have a labor pool which charges on average $10/hr, and another labor pool opens up at $1/hr, NO ONE will hire the $10/hr pool. Even if it means moving overseas and shipping, the costs are FAR lower in the new pool, and the corporations which can afford to do so WILL move.

In the second case, Free Trade implies just that. ANYTHING can be traded by ANYBODY for the right price. We don't have that. Even in the rightwingnuts BEST free trade wet dreams, they wouldn't try to allow nukes to be traded, or sick animals, or anything else dangerous to large numbers of people. Therefore, there MUST be some regulation, and in that case we should regulate anything which can harm us at all!!