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A public policy blog from AEI
In 1903, Joseph Chamberlain rattled his contemporaries with a speech calling for Britain to pursue a policy of protectionism as a bulwark against the rising powers of the world. At the time, critics of free trade were concerned the net trade imbalance was draining the country of capital. Without a reliable statistic to compare the overall rate of growth between economies, critics concluded that the rising exports of other nations must be to the detriment of Britain’s wellbeing. Furthermore, the possibility of Franco-Russo naval cooperation could displace the Royal Navy’s supremacy of the seas, thereby placing at risk their control over world trade. According to Chamberlain, such a state of affairs called for dramatic steps.
Not all were willing to accept Chamberlain’s plan of tariff reform. Britain had thrived for decades adhering to the ideas encapsulated best in Adam Smith’s “The Wealth of Nations,” and its views were backed by influential figures in the cabinet such as Charles Ritchie, then Chancellor of the Exchequer. Faced with warring factions within the Conservative Party, Prime Minister Arthur Balfour split the difference. The country pursued a policy of moderation not wholly defined as free trade but not entirely protectionist either. The plan backfired horribly, culminating in the restoration of the Liberal Party to power. (For more on Britain and its relative decline, see Aaron L. Friedberg’s “The Weary Titan.”)
Today, the United States is facing a situation not at all different from the one Britain confronted at the turn of the 20th century. Like Britain at the time, the US’ supremacy of the seas is in question, it is contemplating the closing of its unipolar moment, and it is divided over trade policy within its ruling party. It is not surprising that protectionism has returned to the public discourse as a reaction to rising powers abroad and dissatisfaction at home. What is surprising is that protectionism’s return has come about using the same flawed analysis that Chamberlain and the critics of free trade used — reliance on the raw output figures, or trade imbalance, which does not adequately capture the entire economic picture between nations.
While many of Donald Trump’s policy positions are uncertain or even contradictory, the president is consistent in his belief that a trade imbalance represents a certain amount of wealth lost. Despite this claim being heavily disputed among economists, the sentiment behind the protectionist instinct is understandable. As was discussed in the early 1900s, the doctrine of free trade guarantees a greater equilibrium of economic wellbeing for all people. It doesn’t discriminate between adversarial powers and allies. When considered from a nationalist perspective, a return to this debate between free trade and security interests is likely to resurface as peer competitors continue to gain economic power and new military capabilities.
The most significant question facing the Republican Party over its trade practices is which side will eventually win out between free trade and protectionism. While the media has speculated that Donald Trump has changed Republican voters’ minds on specific issues, the resiliency of the free trade argument is strong. Since his inauguration, there is considerable evidence from multiple polling organizations including Pew, Gallup, and the Chicago Council to suggest that widespread support for free trade within the Republican Party has gone up. Diana Mutz of the Chicago Council points out that whereas 46% of Trump supporters opposed new trade agreements as of October 2016, a full year later only 17% were opposed.
A political idea founded on false pretenses surely won’t last for long. Similarly, President Trump’s embrace of the trade imbalance as a statistical measure to evaluate the relative strength of economies is doomed to fail. But the protectionist instinct associated with it is no stranger to history and enjoys at least some adherence among Republican voters. Both the National Security Strategy and the National Defense Strategy, released earlier this year, cite an increasingly competitive security environment. An America that must compete with rising powers is sure to question a trading system grounded in the idea of economic expansion for everyone, especially adversaries. The future of America’s trade policy has yet to be charted, but given the resilience and support that free trade still enjoys among the Republican Party’s base, those seeking to disrupt the status quo have an uphill battle.
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