Policy

Are Free Trade's Best Days Behind Us?

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If you were a U.S. trade negotiator in the 1950s or 1960s, you might be a little shocked by the aggressive trade rhetoric thrown around today. China is an existential threat? Our European allies are almost as bad? What exactly went wrong with U.S. leadership of a rules-based trading system?

In truth, the state of American trade policy has been precarious for a while now, and for understandable reasons: the industrial development of a sizeable portion of the developing world; the expansion of trade rules beyond traditional issues of protectionism; and a more powerful international judicial system with "teeth" that can have an impact on U.S. policies. We cannot expect a return to the post–World War II era of bipartisan support for trade agreements.

But thanks to President Donald Trump, the situation has gone from precarious to falling off a cliff. Tariffs have proliferated, as the Trump administration has expanded the use of some trade statutes and dusted off other ones that had been all but forgotten. To the surprise of very few people, U.S. trading partners have retaliated with tariffs of their own.

The Chinese-American relationship may have soured for the foreseeable future. People on both sides of the political spectrum have reasons not to like China these days—human rights violations, security threats—and that will make it difficult to address the trade wreckage left by the Trump administration.

It's tempting to look for relief from some of the many Democrats running for president. But economic nationalism is alive and well on the left. And while voters support trade openness more than they ever have, they tend not to feel strongly about the issue.

Of course, all of the above relates only to U.S. trade policy. The rest of the world is moving in a different direction. The European Union and Japan have just implemented a new trade deal; Canada, Mexico, Japan, and eight other countries are part of the Trans-Pacific Partnership (from which Trump withdrew); China and New Zealand are updating their trade agreement.

In the United States, some future administration will almost certainly get the country back in the game, but it may not happen until we fall far enough behind that the economic pain forces people to take notice.

NEXT: Brickbat: China Calls

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  1. Oh no! No supranational government dictating US policy including IP law? Policy that benefits American labor at the expense of industry rather than the other way round? Not enriching totalitarian regimes while they massacre and abuse their own citizens? Whatever shall we do!

    1. Get a black magic woman?

  2. Boy that orange man sure is bad. If it wasn’t for him we could have the economic prosperity, trade freedom, and government accountability of the European Union!

  3. “Are Free Trade’s Best Days Behind Us?”

    I think that’s a pretty silly thing to say. Even with Trump’s meddling, the overall trend towards a global economy continues. I would prefer that we unilateral end all tariffs and subsidies, but given the money at stake, that’s probably a pipe dream. Even Trump has really only looked to renegotiate agreements, not eliminate them. We’ll see how that plays out. I don’t see trade protectionism as a long-term thing.

    1. I’m hopeful that you’re right. I’d like to take Trump at his word, but USMCA ended up as being very protectionist for US autoworkers. Also, there was a reason that Trump started this with steel and aluminum tariffs. It’s noteworthy that Trump wouldn’t have won the election without blue collar votes in the midwest. I’d expect more protectionism to secure votes from both sides. It’s likely that these same states, MI, OH, WI, PA, will decide the 2020 election as well.

      1. As long as the economy keeps humming along.

      2. First, the world has never had “free trade”. It is not free trade when only one side does it. Beyond that, the US has all kinds of tariffs and protections that predate Trump. This is going to come as a shock to you but Trump didn’t invent the concept of the tariff despite what his critics.

        What you will have is what you always have had, large economies and great powers leveraging their interests as best as possible. The only change might be that the US stops being the only nation on earth that tries not to do that. The horror.

        1. First, the world has never had “free trade”

          It doesn’t mean that it’s not optimal, or not something we libertarians (as promoters of free markets) shouldn’t strive for.

          What you will have is what you always have had, large economies and great powers leveraging their interests as best as possible.

          I get that this is the actual case, but again, it’s not optimal. There seems to be this prevailing assumption that countries actually are trading partners. Individuals trade, period. Governments only role in the process is planning trade through regulations. Since when has any economist outside of Marx pushed for central planning of economic activity?

          Trump insisting on the USA “winning” at trade all the time doesn’t help the free market position. It’s not clear to me whether he and others actually don’t understand how trade works, or if the idea that countries trade just furthers the narrative that government has a legitimate role in regulating trade. Either way, it’s not a good situation for liberty.

        2. amazingly no one bitched when Obama put a huge tariff on tires from China except anyone who had to buy tires since all tires are made in China now

    2. I’m not So sure of that. Protectionism used to be a thoroughly Democrat thing, as all the unions were in the Democrat pocket. Now the only unions left for the Democrats are service and government unions. The rest all flipped over to the Republicans. The name has changed, the dance has not. And that dance is “save us from competition”.

      The only thing that’s going to eliminate protectionism is by getting rid of the idea that competition is bad. And more broadly, the idea that change is bad.

  4. Simon, maybe you’re not old enough to remember or don’t know enough about history, but we didn’t have regular trade relations with the USSR and Communist China in the 1950’s and 60’s.

    We cannot expect a return to the post–World War II era of bipartisan support for trade agreements.

    So, your little comment is a lie and that makes YOU a liar.

    1. He didn’t say that we had global trade in the 1950s and 60s, only that we had bipartisan support for it.

      And he’s right. The Trade Expansion Act of 1962 was passed with 178 Dems and 78 Reps voting in favor in the House. This act helped fuel the “Kennedy Round” of negotiations under GATT that led to massive tariff reductions.

      1. What about the 1950’s smarty pants?

        He said 1950’s and 60’s.

        WWII got the USA into global trade.
        Late 1940s-1950s: During the postwar U.S. occupation of Japan, America supplies two-thirds of Japan’s imports, the majority of them agricultural products. The United States receives nearly a quarter of Japan’s exports. Imports account for 60% of the Japanese auto market.
        Since World War II, U.S. trade relations with Japan have been dominated by one quarrel or another over commodities such as semiconductors, television sets, baseball bats, bicycles, citrus fruit and, of course, automobiles.

        1. Notice the comments that Congressmen were worried about Japan “flooding” the US market with products back in the late 1940s too.

          This claim that Congress had bi-partisan support for free trade is horseshit.

          Democrats hated non-white people..remember? Jim Crowe South? Democrats were not in favor of helping non-Americans get richer via free trade.

          1. This claim that Congress had bi-partisan support for free trade is horseshit.

            I gave you an example and you nitpicked that 1962 wasn’t the 50s and 60s. What more do you want?

            1. I nitpicked that nothing you provided covered the 1960s but not the 1950s and I provided a link that described how the writers claim of bipartisan agreement on free trade is bullshit.

              Facts are facts and they dont match up to the writers claims.

  5. It’s important not to conflate immigration with trade. Even Brexit isn’t as much about rejecting trade with the EU so much as it’s about not being subject to the regulations of the EU–especially in regards to immigration. Meanwhile, trying to lock the UK out of trade with EU because they don’t want to abide by the EU’s immigration and other policies isn’t exactly a pro-free trade move.

    1. They have similarities in that it is a transfer of power from Americans to foreigners.

      Immigrants vote, putting their hand on the gun of government to control where it aims.

      Foreign ownership similarly *controls*. Try criticizing Emperor Xi in a company owned by China. See how that works out for you. Own a company, control it’s resources to benefit *you*.
      Do you think you’re going to be free living in Emperor’s Xi company town?

  6. Mercantilism and it’s bastard offspring Protectionism are among the dumbest political ideas ever thunk up, outranked only by Marxism. The idea that a nation can become wealthy by restricting trade among individuals is mind boggling stupid.

    It’s all based on the idea of trade balance, but there is no such thing. It’s an accounting fiction meant to mask that the accountant is an idiot.

    When I buy $500 worth of goods from China, then China receives $500 dollars but at the same time I receive $500 worth of goods. It balances.
    When China then uses those dollars to buy $500 worth of Fred’s Soybeans, it means Fred now has $500 and China has soybeans. It balances. Even if China uses those dollars to buy German goods, and the Germans use them to buy Chilean goods, and Chile uses them to buy Canadian goods, it all balances. Do the math.

    1. “Mercantilism and it’s bastard offspring Protectionism are among the dumbest political ideas ever thunk up, outranked only by Marxism.”

      The US rose to superpower status under an explicit policy of Protectionism.

      History class is tough!

      “Trade always balances”

      Yeah. Here’s the balance. We get gegaws from China, they purchase companies, land, real estate. The USA gets colonized.

      Some purchases are consumption goods, some are *ownership*, and therefore *power*. I don’t want the US to be a Chinese colony.

  7. Free Trade left the building when Elvis left.

  8. ‘Free Trade’ is Globalism’s Trojan Horse

    The EU’s foundations were laid with the creation of the European Coal and Steel Community in 1952, a trade agreement that harmonized supply chains of said critical resources. Not only would it be economically expedient, it was marketed by its architect Robert Schuman in 1950—and like many another vain hope before it—as something that would “make war materially impossible.” From the beginning, European technocrats realized that economic integration would inevitably lead to political integration.

    History proved them right. Trade agreement after agreement followed, each justified on economic grounds, and supported by conservatives—who could say no to free trade or to the prosperity it promised? And perhaps the EU did enrich Europe, but at what cost? A single market requires a single law: European nations sacrificed their political independence upon the altar of economic interdependence—Europe now shares an increasingly powerful legislature, single currency, and constitution.

    We laugh at the Left for its cognitive dissonance on a host of issues, but we should be careful not to commit the same sin. Make no mistake, political and economic globalization are more than siblings, they are the two faces of Janus—by placing our faith in one, we venerate the other. It is time we returned to the measured and deliberate isolationism that America’s Founders recommended.

    https://nationaleconomicseditorial.com/2019/02/27/globalism-trojan-horse/

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