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Acton Commentary

Hard Times for Free Trade

    Every four years, Europeans ask me to make sense of the strange happenings of the U.S. presidential campaign. It’s usually a pretty straight forward explanation, with the Democrats cast as the closest thing we have to European social democrats and the Republicans as, well, Americans. This year, however, I am telling them we may be witnessing something altogether different and unpredictable, but which may mean the end of an era that has shaped modern Europe as we know it.

    Since the end of the World War II, American politicians of the left and right agreed that it was in the country’s and indeed the world’s interest to promote the lowering of trade barriers. This resulted in institutions such as the General Agreement on Trade and Tariffs and the World Trade Organization as well as regional trading blocs. Today, the leading contenders to become the next American president are all critics of trade pacts such as the Trans-Pacific Partnership.

    It may not be surprising that avowed socialist Bernie Sanders is opposed to free trade, but who could have imagined that the wife of “new Democrat” President Clinton who signed the North American Free Trade Agreement would turn against economic globalization? Or that a Republican like Ted Cruz who grew up idolizing Ronald Reagan would follow suit? Only someone who foresaw the rise of the global businessman/American nationalist known as Donald Trump and the populist movements he and Sanders are currently leading.

    “American politicians of the left and right agreed that it was in the country’s and indeed the world’s interest to promote the lowering of trade barriers. This resulted in institutions such as the General Agreement on Trade and Tariffs and the World Trade Organization as well as regional trading blocs.”

    Some observers are saying we’re going through a political realignment that fundamentally alters the way Americans express their partisan differences. If this is the case, it would mean the end of Reagan-style conservatism that came to power in 1980 and replaced the New Deal coalition of Franklin Delano Roosevelt that dominated the political landscape for 50 years. Their ideological differences notwithstanding, they together shaped the international order that brought peace and prosperity to Europe and much of the rest of the world.

    Along with American security guarantees, free trade may have been the most important pillar of that order. It was the path to demilitarize and reconcile France and Germany, first within the European Coal and Steel Community and then the European Union. It was also the means used to pacify and integrate formerly imperialistic, expansionist Japan and allowed the West to defeat Soviet communism in a relatively peaceful manner. The order was a remarkable success by any measure.

    But the successes of economic globalization have only served to emphasize the plight of those who have not benefited from it. Why have so many parts of Africa and the Middle East failed to advance? Why do so many lower- and middle-class Westerners, who enjoy living standards their ancestors could only have dreamt of, feel alienated? The reasons are many and complex, but the fact that such questions and doubts even exist is proof of wider discontent that populists are exploiting.

    How have supporters of free trade responded? One way has been to distinguish between the idea of free trade and the agreements between governments such as NAFTA and the TPP, which have been criticized by some free-marketers for “managing” trade and creating trade blocs. Another, more radical approach would be to lower trade barriers unilaterally without any kind of managed deal that is inherently prone to cronyism. Few think a global deal negotiated at the World Trade Organization is likely, and the failure to reach one in 2001 may have marked the beginning of the end of international free-trade supremacy. (See this summary of the pros and cons of unilateral, bilateral and multilateral trade arrangements.) 

    Of course economic liberalism always had to deal with the dislocations that come with competition and “creative destruction,” not to mention boom-bust cycles and income inequality, and as such has always been somewhat elitist or at least not populist. The rhetorically stronger argument against free trade has therefore been political rather than economic. The economic case for free trade assumes that consumers do not care if a product is locally or foreign made, that the only thing that matters is getting the best product for the lowest price. The homo economicus is an abstraction and would not be a very admirable type of person even if he did exist. Decent people do not simply make economic calculations about important matters such as where they live or whom they marry.

    It’s the qualifier of “decent” or good that makes us more than efficiency maximizers. Standards of decency may vary in time and place, but standards still exist. They are social insofar as they are shared by members of a community and political when they are supported by the laws. Social and political norms are also held in common by a people, a term which signifies something more than a group of individuals who happen to be living together, which is why the immigration issue to closely connected to that of international trade for its supporters and opponents alike.

    Populists like Trump and Sanders recognize the importance of a people, even if they disagree on what kind of people Americans are and should be. Their argument against free trade come down to whether it is good for the people, something which supporters of free trade have taken for granted, perhaps because the gains have been evident to the ruling class of both parties. As the social scientist Charles Murray argues, American society, even among whites, is increasingly divided about what it values and is evidently coming apart.

    If we are indeed witnessing a political realignment based on trade and immigration, we may eventually see the emergence of a global party of Clinton-Bush types opposed to a nationalist one of the Trump-Sanders variety, which would mark the end of the post-WWII bipartisan consensus on free trade. To use a sports analogy that Europeans may better understand, imagine something similar to the difference between the fans of Roger Federer and Novak Djokovic, but with much more at stake.

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