But while globalphobes of the left and right have united to block fast track and trade liberalization, their unity does not extend beyond obstruction. When it comes to positive agendas, the left and right wings split along nationalist and internationalist lines. So-called economic nationalists like Buchanan want to stop the world and get off--isolate the U.S. market behind protectionist barriers and let everybody else fend for themselves. Indeed, their hostility to trade liberalization is as much political as economic; they see the free trade cause as a cover for undermining U.S. sovereignty and expanding world government. Conservative activist Phyllis Schlafly uses typical rhetoric when she refers to the World Trade Organization as "a sort of United Nations of trade." "It is dishonest to call something `free trade,'" she writes, "when it is managed by a huge international bureaucracy."
Economic nationalists are content simply to trash the world trading system, but their colleagues on the left have bigger plans. Their goal is to remake that system in their own image, creating a larger structure of global governance that imposes social-democratic labor and environmental policies around the world. By ensnaring emerging-market countries in a web of Western-style regulation, and depriving them of their "unfair" advantages of low wages and environmental squalor, they would stop the imagined race to the bottom. Hence most Democrats' refusal to support fast track without a new "blue and green" paint job.
The internationalist strategy was on display in a recent speech by Rep. Richard Gephardt (D-Mo.) before the Council on Foreign Relations. Describing himself as a "progressive internationalist," he cloaked the case for global labor rules in the rhetoric of free trade: "Free trade also requires free markets. And a component of free markets is free labor markets. That's why I have fought so hard, and will never give up the fight, to have workers' rights be an integral component of our trade policy."
Ironically, globalphobia's internal divisions actually strengthen its ability to challenge trade liberalization as traditionally practiced. The economic nationalists can cite the left's labor and environmental agenda as proof that free trade is just a "new world order" plot; lefties can advance the cause of blurring free trade and world government by casting it in opposition to Buchananite "isolationism." Each side thus draws strength and legitimacy from the other.
In reality, of course, globalphobia rests on economic illiteracy. We don't agonize that the country is racing to the bottom because secretaries are replaced by voice mail, or because bank employees are replaced by ATMs. What, then, is so special about the fact that some labor-intensive manufacturing operations are being replaced by Third World factories? All of these trends are part of a larger process: the process of raising productivity, of squeezing more value from less effort. Far from provoking a race to the bottom, this process is the essential precondition for continued increases in our overall standard of living.
Openness to foreign competition pushes productivity, and living standards, upward in two different ways. First, it gives us the opportunity to buy products from abroad that are better or cheaper than those we can make for ourselves. The result is that we are richer as a society. And over time, the work force and resources that would have been devoted to making what we now import can be shifted to sectors in which we are more productive. Second, by causing domestic firms to compete harder and raise their productivity, the spur of foreign competition makes us richer even when we don't end up buying imports. To take an obvious example, Americans drive much better cars today than they did a couple of decades ago, and not just because many drive imports. American cars have improved dramatically as U.S. automakers responded to the challenge of foreign competition.
The proposition that open markets make a country richer is one of the most thoroughly examined and repeatedly vindicated in all of economics. Adam Smith got to the heart of the matter over two centuries ago when he observed that "the division of labor is limited by the extent of the market." By expanding the scope for voluntary exchange beyond national boundaries, international trade fosters a broader division of labor and the resulting gains from increased specialization. The "global hiring hall," as Buchanan puts it, gives us the chance to profit from the ingenuity, creativity, and old-fashioned hard work of billions of participants in a global division of labor.
Clearly, though, many Americans just don't get it. And one reason why they don't get it is that free traders rarely talk about such things. To a striking extent, the case they make for free trade bears no relation to the one made by Adam Smith and his successors in the economics profession.
Instead, advocates of trade liberalization hammer away repeatedly at two main themes: increasing exports and showing international leadership. For example, the Web site for America Leads on Trade, a coalition of pro-fast track businesses, defended fast track and trade expansion by arguing that it is critical "for maintaining U.S. leadership in the global economy," because such agreements "tear down barriers to U.S. trade and investment. These agreements will boost the U.S. economy and create high wage jobs by expanding export opportunities for our companies and workers."
According to the Web site, "Fast track will allow the United States to keep its competitive edge against foreign competitors. If the United States does not have fast track, we risk being left behind."
In such arguments, and in speeches, press releases, and studies from business groups, politicians, and think tanks, from Republicans as well as Democrats, the supporters of trade liberalization make their case for the benefits of free trade abroad. Reducing trade barriers in other countries will increase American exports, and export-related jobs, and show U.S. international leadership. As to the benefits of free trade here, and as to reducing trade barriers in this country, free traders of all stripes remain conspicuously silent.
Why? Why let the globalphobes carry the day by default? Basically, free traders have been fighting the last war. Their political strategy dates back to a time when grassroots interest in trade issues was virtually nil, and the economic stakes of trade policy were of concern only to organized business interests. Furthermore, the current strategy is a product of the Cold War, when all international economic issues were viewed through the prism of superpower rivalries.
Under those conditions, free traders hatched their strategy of diversion and appeasement. By pursuing trade liberalization exclusively through international negotiations, they diverted attention away from the U.S. market and onto the benefits of opening markets abroad, and neutralized protectionist lobbying pressure from domestic import-competing industries. In this way they recruited exporting industries to lobby vigorously for trade expansion. At the same time, they diverted attention away from economics and onto diplomacy by stressing the geopolitical gains from trade agreements--notably, cementing the Western alliance and keeping Third World countries from defecting to the Soviet camp.
And when diversion didn't work, free traders settled for appeasement, making measured concessions to protectionist demands in order to forestall a larger backlash. The major concession was a system of "trade remedy" laws--including the anti-dumping law, the countervailing duty law, and the Section 201 "escape clause"--which allow special duties to be imposed on imports when legally established criteria are met. These laws were supposed to act as a safety valve that keeps protectionist pressures from building to dangerous levels.
However unattractive to the free trade purist, the diversion-and-appeasement strategy achieved results for many years. Tariff levels plunged during the postwar era as the United States, long a protectionist nation, maintained a commitment --honored at times in the breach--to a policy of gradual liberalization here and abroad.
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