America and Protectionism: The Myth of Free Trade

Sen. Robert Dole’s sweep of the “Junior Tuesday” primaries last week may have clinched his hold on the Republican presidential nomination, but neither his nor the GOP’s troubles are over. Patrick J. Buchanan has touched a raw nerve in U.S. politics, and the Reagan coalition is beginning to crack.

The picture that sticks in the mind is Buchanan posing at Mt. Rushmore to tell the world that the four guys on the mountain all backed his stand on trade--and that Buchanan’s protectionism is the historic doctrine of the Republican Party.

What probably irritates the establishment more than anything else is that, up to a point, he’s right.

George Washington, Abraham Lincoln, Theodore Roosevelt and, to a lesser extent, Thomas Jefferson were all protectionists. All believed that high tariffs would protect and strengthen American industry, and Roosevelt, in particular, believed that high U.S. tariffs protected American workers from low-wage competition overseas.

For most of this country’s history, free trade was a shady and subversive idea, like free love. American business feared that high-tech competition from Britain, or low-wage competition from poorer countries, would crush American-based industries and destroy jobs at home.

The result was a history of generally high-tariff trade policy from the Washington administration to the Great Depression. And the Republican Party, from Lincoln to Herbert Hoover, was the proud standard bearer of protection.

That’s not the whole story, however. The Smoot-Hawley Bill of 1932 was the last great protective tariff the United States ever passed--and it ended in disaster. When the United States raised its tariffs in the middle of the Depression, its major trading countries raised their tariffs, too. U.S. imports fell--but so did U.S. exports. More jobs were lost, and the Depression got worse.

Smoot-Hawley marked the end of the traditional U.S. trade policy. Since then, the pendulum has swung, hard, toward opening up U.S. markets.

The reason for the change was simple. For most of our history, we could act like Japan does today.

The reason was Britain. After 1849, free-trade advocates were firmly in control of British politics. They believed Britain would do best with free trade--even with countries that had high-tariff barriers against British goods.

That meant the United States could have the best of both worlds. Our exports were welcome in the world’s biggest market--and we could still have tariffs at home. Britain paid the defense cost of policing the world, and it allowed us to trade freely without asking for equal access to our markets at home. The deal was as sweet for us as it is for Japan; we got richer and richer, as long as it lasted.

All good things, alas, must come to an end. Ultimately, the U.S. economy got so big that the British couldn’t carry us anymore. When we raised our tariffs in 1932, the British cheated: They raised theirs back. The result was a trade war and an economic crisis in both countries.

Cut to 1945. Suddenly, the United States had replaced Britain as the world’s economic and political center. Now we had to deal with the same kinds of problems the British used to worry about--and made some of the same choices.

After World War II, we wanted, badly, to make Europe and Japan rich. If they stayed poor, they might turn communist. And even if they didn’t go red, they could never buy goods from us unless they got their economies back on track.

Unfortunately for America’s tradition of trade protection, the only way the Europeans and Japanese could ever get rich enough to buy our goods was if we started the ball rolling by allowing them to sell here.

That’s what we did--and it worked.

For 50 years, America pursued a policy of opening markets. Europe and Japan got rich--but so did we. Increased exports created millions of jobs in the United States. And imports made our lives better too. Imports keep prices down by forcing companies to compete harder to produce quality goods at reasonable prices.

Buchanan thinks it’s time for another change. Rich countries like Japan, say the Buchananites and others, are too big to carry. Ultimately, Britain had to demand reciprocity from the United States; now America must do the same with Japan.

Few people today disagree with this; the question here is not whether to get trade reciprocity with Japan, but how. For 20 years, U.S. administrations have been working to open Japanese markets to American goods, with limited success. Buchanan’s approach--slap them with a big, fat tariff--will work.

Of course, nobody knows until we try, but doubters note that Buchanan’s plan is just what Britain tried when it raised its tariffs after we passed Smoot-Hawley. The result wasn’t just an economic disaster for Britain; bad feeling over the trade spat made U.S. opinion more anti-British in the years leading to World War II.

That could be bad news. As China grows, the United States still needs political cooperation from Japan; starting a trade war isn’t the best way to get it. Other problems arise with developing countries. Buchanan, and a lot of other Americans, are sick and tired of an international trade system that forces U.S. workers to compete against dollar-a-day factory labor and child labor in poor countries. Why not, asks Buchanan, go back to William McKinley and Roosevelt and protect American workers from low-wage, low-regulation competition abroad?

Multinational corporations react to this idea like vampires to garlic. So do poor countries, including China and India. However, the political momentum behind “social tariffs” is growing. Recently the European Union decided to push for social and labor standards in international trade; the North American Free Trade Agreement’s labor and environmental standards, weak as they are, are a first, baby step in this new direction.

But, once again, Buchanan’s approach may be counterproductive. Buchanan wants the United States to go it alone in world trade--to withdraw from organizations like the World Trade Organization.

What Buchanan doesn’t understand is that organizations such as the WTO help us more than hurt us. The United States wants to trade all over the world; for that to work, we need a system of internationally accepted rules and regulations. Sometimes, those rules drive us crazy, but trade anarchy isn’t the answer.

Buchanan is like a man who wants to abolish traffic control because he just hit a red light. Sure, the red light slows you down. But driving would be a far more unpleasant experience if there weren’t any rules of the road.

Buchanan is half right about trade. The establishment’s hands-off approach to free trade can’t and won’t work. While many Americans are big winners in world trade, there are too many losers and they are hurting too badly for us to go on as we have since 1945.

But, on the other hand, we can’t go back to Buchanan’s golden age of protection. There’s no British Empire anymore. If we don’t stand by the international trade system, there won’t be one, and the U.S. economy will pay a heavy price. The founding fathers and the guys on Mt. Rushmore weren’t, at bottom, free traders or protectionists. They were American nationalists who believed that, in all the changing circumstances of life, the U.S. government should follow trade policies that would raise the American standard of living.

Pragmatism is the American way. Until Buchanan can offer practical solutions for the problems he describes, he will remain a marginal, protest figure in the pageant of American politics. But until the establishment can find pragmatic answers for the questions Buchanan’s candidacy raises, popular disaffection will continue to grow.