Is the GOP Really the Party of Free Trade?

07/10/2008 05:12 am ET | Updated May 25, 2011

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.