Why do free traders get so worked up about tariffs and other kinds of trade regulation? Why, for that matter, are there any dogmatic “free traders” in the first place?  Instead of merely criticizing the Trump administration’s particular tariffs, while making the case for some other mix of strategic trade policies, many on the Left, center, and libertarian Right have denounced the idea of any government regulation of trade at all.

What explains this fervent dogmatism? After all, it is possible to be for trade liberalization in some industries or in some eras and for protectionism of various kinds in others. Tariffs, for example, have different uses; they can be used to raise revenue; as a bargaining chip in negotiations to open foreign markets; or to protect national industries against foreign competition, in the interest of national security or domestic economic diversification and growth. Tariffs are merely instruments of economic statecraft, like taxes of other kinds, tax deductions and exemptions, direct grants, regulations, price controls, capital controls, financial sanctions, public ownership, and other tools of government, all of which are appropriate in some cases and not in others. The only rational answer to the question of whether free trade or protection is the best policy is: it depends.

The only rational answer to the question of whether free trade or protection is the best policy is: it depends.

Even at the height of tariff-based protectionism in the United States during the 19th century, many imports were exempted from tariffs. For example, the Tariff Act of 1890, more commonly known as the McKinley Tariff, hiked the average tariff on dutiable imports to 49.5% and eliminated tariffs on raw sugar, molasses, coffee, tea, and hides.

And the Trump administration’s 10% global tariff exempts pharmaceuticals, critical minerals, metals, and fuel oils.

To my knowledge, there has never been any significant policymaker or thinker in any modern country who insisted that all countries in all times should have prohibitive tariffs on all imports, in the way that free-trade zealots insist that free trade is the only legitimate policy anywhere, everywhere, and in every era.

The excess of fervor is entirely on the side of the dogmatic free traders. Their insistence that tariffs are completely illegitimate in all cases is far out of proportion to the occasional abuses of rent-seeking special interests that manipulate tariffs and other trade regulations for their own advantage. Nobody proposes to ban road building because some contractors bilk state and local governments or to abolish the armed services because of corrupt practices by some defense corporations and members of Congress.

If you are a dinner guest and one host responds to a spouse’s request for the salt shaker by slamming it down on the table and shouting, “Here! Here’s the salt shaker! Are you satisfied?”, you may infer tensions that have nothing to do with the ostensible subject of the exchange. Similarly, if, in what should be a dispassionate debate about a dull and technical subject, the free traders get angry and agitated, it is clear that something else must explain their surplus of emotion.

Those who passionately support free trade everywhere and all the time, without qualification, tend to belong to three groups: neoclassical academic economists, libertarian ideologues, and utopian Cobdenite and Wilsonian believers in world peace through economic interdependence. 

For economics professors, dogmatic support for free trade distinguishes them from the ignorant masses and protects them from being ostracized by their colleagues in the guild. Libertarians oppose trade restrictions because they oppose almost all government policies of any kind. Last, but not least, there are well-meaning people who have been taught by the op-ed pages to worry that trade wars might lead to shooting wars. 

Let’s begin with the economics professors who get all hot and bothered whenever the subject of trade comes up in public debate. As David Autor, an economist at MIT, recently observed: “one could say that there was something of a guild orthodoxy: The key dictum was that policymakers should be told that trade was good for everyone in all places and times.”

This “guild orthodoxy” is only 80 years old. After World War II, rival schools of economics—institutional economics, Marxism, libertarian Austrian economics, Post-Keynesianism—were purged from American university economics departments in favor of “the neoclassical synthesis”—a pseudo-scientific, math-heavy version of liberal economics that was far more schematic and dogmatic than the classical liberalism of Adam Smith, J.S. Mill, and Alfred Marshall had been. When the mathematician Stanislaw Lem challenged the economist Robert Samuelson to identify one proposition in so-called “social science” that was both true and non-trivial, Samuelson responded with the nineteenth-century British economist David Ricardo’s example in an 1817 essay of “comparative advantage.” 

Ricardo argued that even if Britain could produce both textiles and wine more efficiently than Portugal, both countries would be better off if Britain specialized in cloth and Portugal in wine. The theory hasn’t dropped off in popularity since. As American Compass’s Oren Cass notes:

‘The theory of comparative advantage is a closely reasoned doctrine which, when properly stated, is unassailable,’ Samuelson would write in his industry-leading textbook, Economics, which debuted in 1948. ‘With it we are able to separate out gross fallacies in the political propaganda for protective tariffs aimed at limiting imports.’ Almost half a century later, Professor Paul Krugman confirmed, ‘the essential things to teach students are still the insights of Hume [a contemporary of Adam Smith] and Ricardo.’

Even worse, in the 208 years since Ricardo published his thought experiment, not a single case of international specialization based on comparative advantage—as opposed to other factors—has ever been identified in the real world.

A “science” that, in the case of trade theory—according to its leading practitioners—has made little progress since 1817 does not seem very scientific. Even worse, in the 208 years since Ricardo published his thought experiment, not a single case of international specialization based on comparative advantage—as opposed to other factors—has ever been identified in the real world. When Paul Krugman, in a 1995 essay, “Ricardo’s Difficult Idea,” attacked yours truly along with other advocates of American industrial policy and strategic trade, the future winner of the fake Nobel Prize in Economics (the Riksbank Prize) made a rookie error by confusing Ricardian comparative advantage with mere international labor arbitrage based on low wages—a form of absolute advantage—in the case of manufacturing by multinational corporations in Vietnam. 

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The groupthink, self-righteousness, and animosity displayed by neoclassical academic economists in their dogmatic promotion of free trade can be explained by their insecurity about the status of their profession. To question the idea that academic trade theory, dressed up in math, is as rigorous as, say, quantum physics is to imply that American economics professors have less in common with scientists than with Scientologists.

Libertarian ideologues are another group who bring a degree of emotionalism to technical debates about trade that is far out of proportion to the stakes involved. Although they are considered to be on the political Right today, in the 19th century their predecessors were called liberals or radicals. They opposed not only protectionism but also empire, colonialism, military spending, guilds and labor unions, and public welfare programs. Liberals, anarchists, and Marxists shared similar Enlightenment assumptions about natural human sociability and rationality. They agreed that the goal was a post-national global society of radically-emancipated individuals, although they disagreed about how to get there.

Why do today’s libertarians tend to devote nearly all of their time and energy attacking tariffs and other trade regulations rather than fighting on other fronts in the war against government? The answer is that self-interested corporate donors and wealthy individuals manifestly spend more funding libertarian thinkers and pundits to promote free trade rather than funding other libertarian causes like drug legalization.

The answer is that self-interested corporate donors and wealthy individuals manifestly spend more funding libertarian thinkers and pundits to promote free trade rather than funding other libertarian causes like drug legalization.

The alliance of convenience and (sometimes) conviction between economic interest groups that favor trade liberalization and devout free-market radicals first coalesced during the debate about the Corn Laws in Britain in the mid-nineteenth century (“corn” is the British term for what Americans call “wheat”). The industrial capitalists of Manchester and other British manufacturing centers—the “Manchester liberals”—sought to maximize their profits while minimizing the wages they paid their workers. 

However, the factory workers and their families needed to eat. By repealing the protectionist tariffs that protected British wheat growers in order to import cheaper wheat from foreign countries, the British government could make bread more affordable for the proles, even if their wages did not go up. Although most 19th century liberals opposed trade unions, calling for imports of cheap foreign grain allowed them to pose as friends of the working classes, in the same way that today’s free traders praise cheap Chinese imports for effectively increasing the disposable incomes of working-class Americans. In addition to helping to keep the cost of wages low, free trade also promised to increase the supply and lower the cost of cotton and wool for textile manufacturing, which was the most important industry in Britain at the time.

British industrialists found propagandists of genius in Richard Cobden, a successful textile manufacturer who lived in Manchester, and John Bright, a partner in his family’s cotton mill business, who took the universal tendency of economic elites to equate their own economic self-interest with the good of the nation and all of humanity to an extreme. 

The Anti-Corn Law League succeeded in obtaining the repeal of the Corn Laws in 1849. Cobden Clubs that agitated for free trade sprang up in the U.S., as well as in Britain and other countries. An English poet, Ebenezer Elliott, won fame as the Corn Law Rhymer for his versified tracts against the tariffs that protected British wheat growers. 

In 1904, George Bernard Shaw satirized the dogmatic free trader through the character Broadbent in “John Bull’s Other Island,” who declares: “[e]very civilized man must regard murder with abhorrence. Not even in the defense of Free Trade would I lift my hand against a political opponent, however richly he might deserve it.”

This history is important for understanding the third faction of zealous free traders: idealistic one-worlders. Just as 20th century communists were able to seduce non-communist idealists into becoming “fellow travelers” by supporting civil rights and antiwar movements, the Cobdenites appealed to idealists by equating free trade with world peace. On January 15, 1849, shortly before the Corn Laws were repealed, Cobden gave a speech in Manchester, claiming that universal adoption of free trade would produce a global utopia:

I look farther; I see in the Free-trade principle that which shall act on the moral world as the principle of gravitation in the universe,—drawing men together, thrusting aside the antagonism of race, and creed, and language, and uniting us in the bonds of eternal peace… I believe that the desire and the motive for large and mighty empires; for gigantic armies and great navies—for those materials which are used for the destruction of life and the desolation of the rewards of labour—will die away; I believe that such things will cease to be necessary, or to be used, when man becomes one family, and freely exchanges the fruits of his labour with his brother man…[A]nd I believe that the speculative philosopher of a thousand years hence will date the greatest revolution that ever happened in the world’s history from the triumph of the principle which we have met here to advocate.

Was Cobden right? Check back in 2849 AD.

In his Fourteen Points speech in 1918, President Woodrow Wilson called for “the removal, so far as possible, of all economic barriers and the establishment of an equality of trade conditions among all the nations consenting to the peace and associating themselves for its maintenance.” What now bears his name as “Wilsonian idealism”—the idea that wars should be made obsolete by global free trade and collective security—is Cobdenism transplanted to the United States. 

What now bears his name as “Wilsonian idealism”—the idea that wars should be made obsolete by global free trade and collective security—is Cobdenism transplanted to the United States.

But the constituencies for free trade and protection in the United States have been the opposite of those in the United Kingdom. British industrialists, confident in the supremacy of British manufacturing, supported free trade, while many British agricultural landlords opposed it. In contrast, manufacturers in the North in the United States during the 19th and early 20th centuries tended to support protection for nascent industrial interests from British imports. Meanwhile, Southern and Southwestern plantation owners and ranchers opposed tariffs that helped Northern industry and favored trade liberalization to enlarge foreign markets for their commodity exports. 

No American did more to promote indiscriminate free trade as a government policy than Cordell Hull. Representing Tennessee in the House and the Senate, Hull, like other Democratic representatives of the commodity-exporting Southern oligarchy, fought against protective tariffs for American industry. Hull continued his crusade for free trade as Secretary of State, promoting global free trade after World War II through the General Agreement on Trade and Tariffs (GATT), now the World Trade Organization (WTO). Hull also won the Nobel Peace Prize for his role in founding the United Nations. 

Like the earlier Cobdenites, Southern Democratic Wilsonians could claim that the trade policy their region’s economic elite favored would bring about world peace through commercial interdependence. Hull described how he committed himself to the crusade for free trade after World War I:

From then on, to me, unhampered trade dovetailed with peace; high tariffs, trade barriers, and unfair economic competition, with war. Though realizing that many other factors were involved, I reasoned that, if we could get a freer flow of trade—freer in the sense of fewer discriminations and obstructions—so that one country would not be deadly jealous of another and the living standards of all countries might rise, thereby eliminating the economic dissatisfaction that breeds war, we might have a reasonable chance for lasting peace.

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Hull’s views became the elite consensus for a generation after World War II. Thanks to the wartime destruction of America’s major trade rivals in Europe and Asia, America’s manufacturers and manufacturing labor unions viewed free trade as an opportunity rather than a threat between 1945 and the 1970s. The result was the first broad national consensus in favor of free trade in the United States for three decades, ending in the 1970s and 1980s when competition from a rebuilt West Germany and an industrializing East Asia became a political issue. 

From the 1970s until the present, American multinational corporations, which sought to shut down factories in the United States and open them in other countries like China and Mexico that offered cheaper labor and other subsidies, were incentivized to hitch their wagons to the free trade coalition, which includes American finance and business services—sectors that have enjoyed trade surpluses in spite of chronic U.S. manufacturing deficits—and the military and civilian careerists of the U.S. foreign policy establishment seeking peace through trade. Globalization has been resisted by a new American economic nationalist coalition, consisting of less politically influential U.S. manufacturers unable or unwilling to offshore production, manufacturing trade unions, politicians promoting local industrial development, and national security strategists.

The major legacy newspapers like the New York Times and the Wall Street Journal, like the Financial Times in London, reflect the support for globalization of these elite interests, which represent their readers, funders, and organization staff. And they also provide a voice to the anti-labor, pro-offshoring tech industry in the case of the Washington Post, which Amazon founder Jeff Bezos bought and turned into a libertarian propaganda organ. Their editorials and op-ed pages routinely recycle the old themes of Cobdenite and Wilsonian free trade fundamentalism.

The major legacy newspapers like the New York Times and the Wall Street Journal, like the Financial Times in London, reflect the support for globalization of these elite interests, which represent their readers, funders, and organization staff.

The most popular talking point of the globalist establishment is the claim that the Smoot-Hawley tariff of 1930 caused the Depression, which in turn caused World War II. Since the Depression began with the Wall Street crash of 1929, this puts the alleged cause a year after the alleged effect. While it is true that some other countries retaliated against America’s tariff increase, global trade would have been minimal in the 1930s without Smoot-Hawley because economies had already collapsed worldwide thanks to the financial panic. Even Paul Krugman, a defender of free trade orthodoxy, acknowledges “how the notion that the Smoot-Hawley tariff caused the Great Depression—a notion unsupported by either theory or evidence—nonetheless became conventional wisdom.”

Not only was the Depression not caused by tariffs, it did not lead to World War II, which was provoked by a second attempt by Germany, under the new management of the more radical National Socialists, to achieve the goal of Imperial Germany in World War I—German superpower status, based on German domination of continental Europe. Hitler did not invade France, Poland, and Russia to sell Volkswagens. 

Most great-power conflicts are about security or relative power, for which national leaders are willing to sacrifice short-term prosperity. To find wars motivated by commercial rivalries we have to go back to minor conflicts like the Anglo-Dutch wars of the 17th century. But try explaining this to poorly educated editorial writers and pundits who, in the tradition of Cobden, Bright, Wilson, and Hull, warn that this or that trade dispute might get out of hand and lead to World War III.

While elements of the Trump administration’s strategic trade policy can and should be criticized, those who dogmatically object to any strategic trade policy at all cannot be taken seriously as critics.  
It is difficult for pragmatists to engage dogmatic free traders in rational debates, given their various passionate personal commitments to academic professional status, libertarian ideology, or one-world idealism. The most that pragmatists can do is to persist in answering the question “Which is better—protection or free trade?” with the answer: it depends.