Trade Happens

Opening America's Market: U.S. Foreign Trade Policy Since 1776, by Alfred E. Eckes Jr., Chapel Hill: University of North Carolina Press, 424 pages, $34.95

Whenever Pat Buchanan is confronted with an economic argument, he invokes "history" to prove his point. During the presidential primary season, Buchanan responded to criticism from Sen. Phil Gramm (R-Tex.) by telling Human Events, "Phil has a Ph.D. in economics; that's his problem. He doesn't know history." He also argued that George Will's "disparagement of tariffs...is rooted in an ignorance of his nation's past." The four faces on Mount Rushmore, he says, were all protectionists; and the United States developed into a mighty industrial nation during the golden age of protectionism.

Buchanan cites a number of writers for intellectual support. Of these, Alfred E. Eckes Jr.--a Reagan appointee to the International Trade Commission and a history professor at Ohio University--is the most academically respectable. With Opening America's Market: U.S. Foreign Trade Policy Since 1776, Eckes provides protectionists with a "usable past." They have not been slow to take advantage of it. In addition to Buchanan, the peripatetic provocateur Michael Lind is an admirer of Eckes. In TheNew York Times Book Review, Lind wrote that the book "unites scholarly rigor with a policy maker's sensitivity to the political factors influencing trade....One hopes that future historians will provide their readers with a perspective on the past as helpful as the one Mr. Eckes has given us."

The book's tone and style are certainly scholarly; Eckes disavows any desire "to pursue an ideological agenda." His conclusions are almost always carefully hedged, or offered as mere conjectures.

Yet the tendentiousness of Eckes's presentation of the evidence nevertheless becomes clear as soon as he starts discussing the trade views of the Founding Fathers. Eckes quickly glosses over the fact that the United States was born in revolt against, among other things, Britain's corrupt, unfair, and restrictive mercantilist system. Thomas Jefferson's 1774 remonstrance to King George III, which Eckes gives short shrift, outlines the colonists' complaints. Jefferson himself emerges from Opening America's Market as a late-in-life convert to "economic nationalism." As president, he did indeed impose an embargo, but only to stop the seizure of American vessels by warring European powers. (It didn't work, but it did cause a depression in the northeast and a minor secession crisis--a failure Eckes totally ignores.) In retirement, Jefferson's hostility to England led him to embrace a voluntary buy-American policy, not a protective tariff.

The arguments of free traders are ignored in the discussion of early America, as they generally are throughout the book. Eckes pays no attention to important documents like the Free Trade Memorial drafted by Albert Gallatin in 1831. Gallatin, secretary of the treasury under Jefferson and Madison and perhaps the foremost early American theorist of free trade, appears once in the book, delivering what sounds like a protectionist quote; Eckes omits its wartime context. Andrew Jackson, a critic of protectionism, gets the same treatment.

Even early American protectionists' views are distorted. Eckes doesn't distinguish between the views of Alexander Hamilton and those of Henry Clay. Hamilton didn't reject Adam Smith but thought there were exceptions to his theory. He hoped that high American wages and low taxes would encourage mass immigration, thus developing America's home market. We may safely assume that this is not quite what Eckes (or Buchanan, or Lind) has in mind. Hamilton's protectionism was narrowly focused. He preferred direct subsidies to tariffs and wanted exemptions from tariffs for businesses that imported raw materials. And he advocated (low) tariffs against the backdrop of a degree of economic freedom within the United States that no longer exists.

Clay, on the other hand, was more like today's Buchananites in his trade views, complete with a cultural pessimism and xenophobia Hamilton lacked. Clay asserted, as Buchanan and Eckes do today, that the burden of tariffs falls exclusively on foreigners, not American consumers. Protectionism, in other words, is free. It doesn't cause prices to rise, and Eckes even asserts that it doesn't necessarily cause imports to drop (in which case, it's hard to see what's being protected). To square his views with the historical record, Eckes must insist that protectionism has no correlation with any other factors. Throughout the book, he essentially adopts the "shit happens" theory of economics to explain historical developments.

The evolution of the tariff during the Civil War is an interesting story, but not one well told in Opening America's Market. Eckes trumpets an Abraham Lincoln statement that free trade "must result in the increase of both useless labour, and idleness; and so, in proportion, must produce want and ruin among our people." He tactfully declines to sketch the argument that precedes Lincoln's conclusion--that the tariff promoted useful labor by eliminating the "useless labour" of transportation.

Eckes dates America's economic golden age from the enactment of the Morrill Tariff of 1861. But the extreme protection he celebrates really started in 1862 and 1864, when tariffs were increased substantially to compensate businesses for wartime taxes. High tariffs were enacted, in other words, to enable big business to become tax collectors for the government. After the war ended, the high tariffs didn't.

Eckes argues that protection was popular, bringing Republicans a near-lock on the presidency for 70 years. Perhaps. But it is worth noting that low-tariff Democrats won the people's House in eight of 10 elections following 1874, and the presidential election of 1892, which turned on tariff issues. Justin Morrill, though a protectionist himself, thought it necessary to reduce the wartime rates in order to prevent the public from turning against protection entirely.

More important, Eckes argues that protectionism worked: "Over the forty [high-tariff] years from 1889 to 1929 GNP and per capita GNP, both adjusted for inflation, rose at a higher average rate than during a recent similar period [1952-1992] of trade liberalization." Of course, extraneous changes like the growth of the welfare state make the comparison pointless. But note the arbitrary cut-off dates: 1889 followed two decades of lousy wage growth under protection, and protection hardly ended in 1929 (although suspicious minds could devise reasons for adopting that year as an endpoint). The golden age to which both Eckes and Buchanan hark was characterized by stagnant wages and substantial labor unrest; the postwar period has been much better on both scores. Population growth, including immigration, accounted for much of the increase in GNP during the earlier period.

But all of this is just a warm-up. The core of the book--where Eckes is at his most forthrightly polemical--is the chapter devoted to an attempted rehabilitation of the Smoot-Hawley Tariff of 1930. Eckes correctly notes that "secondary and college students have learned to associate Smoot-Hawley with the 'evil consequences' of protectionism." He seeks to disprove four major claims about the law: 1) that it "increased U.S. tariff rates to the highest levels in history"; 2) that "these sky-high tariffs frightened the stock market"; 3) that "Smoot-Hawley exacerbated the Great Depression"; and 4) that "other nations retaliated with trade restrictions of their own." Lind is particularly impressed with this section of the book.

Textbook writers who make the first claim, Eckes asserts, "have not examined the evidence carefully." For instance, he notes that the ratio of duties collected to total imports was, at 13.7 percent, lower than the ratio established by the Fordney-McCumber Tariff of 1922 and most other previous tariffs. Smoot-Hawley increased the percentage of imports that were duty-free to 69.5 percent, much higher than at other times in the nation's history (the 1992 percentage was 37.1). So, he concludes, "Smoot-Hawley may actually have lowered average duties."

Leave aside for the moment the fact that 11 of the 13 tariffs he compares with Smoot-Hawley in his chart are among the highest in the nation's history, while the low tariffs of 1791, 1816, 1820, 1846, and 1857 are ignored. If Eckes's revisionist case sounds convincing, it's only because he presents misleading measures of the tariff burden. The amount of duties collected, and the proportion of dutiable products, ought to go down the more prohibitive a tariff becomes. Consider a hypothetical example: If a country slapped 1 million percent tariffs on everything but coffee, coffee is all it would import. Presto! One hundred percent of all imports would be duty- free.

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