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2008 Campaign
Family Security Matters does not stand behind or endorse any candidate for president (or any other public office). However, as the President is also Commander-in-Chief and is responsible for setting national security policy, we will be publishing a variety of articles on both the Republican and Democrat candidates for President during this election year. As always, the opinions of our Contributing Editors are their own, and do not necessarily reflect those of Family Security Matters.
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August 5, 2008
Exclusive: Free Trade and the Delusions of Post-Doha Ideology
“Thank God I'm not a Free Trader.” Thus wrote President Teddy Roosevelt to his close Republican ally Sen. Henry Cabot Lodge a century ago. With the collapse of the World Trade Organization summit in Geneva last week, many people around the world are expressing the same sentiments. For those who remain Free Traders, there has been great difficulty in explaining how the clash of national interests could override their ideology, which is based on the alleged economic harmony of people. Free Trade is not just an academic theory; it is a philosophical view of the world. Its basic concepts came into maturity during the years following the defeat of Napoleon. After a quarter century of warfare, intellectuals thought surely the world was ready for the peaceful pursuit of the economic gains promised by the Industrial Revolution.
This same feeling was at work after the Cold War. In 1994, the Uruguay Round of trade talks was completed and the WTO was created. The Reagan and first Bush administrations had not favored establishing the WTO, a supranational body with the power to declare national laws a violation of its trade rules. The Uruguay talks collapsed in 1988. President Bill Clinton, however, saw a more peaceful world and signed the revived agreement. As late as 1999, Clinton was still claiming “perhaps for the first time in history, the world's leading nations are not engaged in a struggle with each other for security or territory. The world clearly is coming together.”
In an op-ed for the Wall Street Journal last week, Douglas Irwin, an economics professor at Dartmouth, and Amity Shiles, a senior fellow at the Council on Foreign Relations, tried again to link Free Trade with peace to salvage their ideology from the wreckage of the current Doha Round. With the prospects of another Democrat president coming into office next year, they concentrated on the views of Cordell Hull, who served as President Franklin Roosevelt’s Secretary of State from 1933 to1944. They quote Hull as saying after World War I, “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.”
Yet, Europe had flirted with Free Trade in the mid-19th century, and then pulled back. During the period 1877-1913, countries that wanted to develop their own economic capabilities, rather than have them suppressed or disrupted by the commercial tactics of rivals, adopted Protectionism. The result was that industrial growth rates tripled. The United States, under Republican presidents like William McKinley and Teddy Roosevelt, supported tariffs to give Americans command of their own expanding continental economy. By 1914, the U.S. was out-producing England and Germany combined.
Irvin and Shile titled their op-ed “Democrats Once Did Free Trade.” But Republicans used to do protection. “By the election of 1880 protectionism virtually equaled Republicanism,” states historian Tom E. Terrill in his book The Tariff, Politics and American Foreign Policy 1874-1901. And for 70 years the GOP was the dominant party. Sen. John McCain, who has admitted not to understanding economics, should read some history about international commercial rivalry and national development.
In Europe, the fact that protectionist Germany was out-producing Free Trade England had major strategic consequences. It gave the Kaiser and, a generation later, Hitler the means to nearly dominate Europe. Irwin and Shile lament that after World War I, “Britain turned against free trade and adopted discriminatory imperial preferences. Other countries kept wartime controls on trade in place.” The British were behaving as liberals who had been mugged. In 1917 the Imperial War Cabinet adopted a resolution calling for a system of trade preference within the British Empire, concluding that “The time has arrived when all possible encouragement should be given to the development of imperial resources, and especially to making the Empire independent of other countries in respect of food supplies, raw materials and essential industries.” This was to be done by using tariffs to protect producers within the empire from outside competition. This principle had been rejected in 1907, but was enacted in 1919.
However, after 70 years of Free Trade, England's industrial decline had progressed too far to be easily reversed. Some improvement was made. Non-Empire imports had been cut from 22% of England's GNP in 1913 down to 10% by 1938. Yet, England still found its industrial base inadequate in the face of the revived threat from Nazi Germany. Without the support of American finance and industry, England would have found itself bankrupt and unable to further resist the Axis in 1942.
Strategic calculations like this mean nothing to Free Traders. Hull sounded much like his contemporary Norman Angell. In 1910, the British Angell published the best-seller The Great Illusion. Written in opposition to a plan to expand the Royal Navy in the face of a rising Imperial Germany, Angell argued that financial and commercial interdependence made war impossible in the modern era, and thus a larger fleet was unnecessary. He was proven dreadfully wrong four years later. Yet, there was an attempt to revive Angell’s thought after World War I. He was awarded the Nobel Peace Prize in 1933. Unfortunately, that was the same year Adolf Hitler came to power, and Winston Churchill warned Parliament of the dangers of a Germany “with her factories equipped to the very latest point of science by British and American money.” Hull’s own career took him into World War II, which contradicted his earlier optimism.
Irwin and Shile mention how Hull pushed through the Reciprocal Trade Agreements Act of 1934. But there was nothing reciprocal about the negotiations last week in Geneva. The Doha Round had been declared a “development round” in 2001, meaning it was supposed to shift the balance away from the “rich” nations of America and Europe to rising powers like China, India, Brazil and others. The developing countries refused to open their industrial markets, demanded larger cuts in U.S. and EU farm programs, and asserted their own right to erect “safeguards” against agricultural imports. Doha had recognized food security as a legitimate area for protection and support even before the current world food crisis. The resolve of China and India (with the tacit support of most other countries) to control both their agricultural and non-agricultural markets brought the Geneva talks to an end.
As the Washington Post reported, when chief Indian negotiator Kamal Nath returned to New Delhi, he was congratulated by colleagues at a cabinet meeting for “bravely fighting the nation's battle.”
The eminent thinker Samuel P. Huntington sees people like Irvin and Stile as being, “out in left field...because they are blind to the fact that economic activity is a source of power as well as well-being.” The post-Cold War euphoria is over and the real world of cutthroat competition has reemerged. Not only is the global division of wealth at stake, but also the power that is built upon economic success. Trade policy for the rising powers is about how to manage trade for national advantage.
The United States, which ran a $679 billion manufacturing trade deficit last year, must do a better job of defending its own economic base. The next administration will need to change both domestic and international economic policies to rebuild the foundations of the American economy if the U.S. is to remain the preeminent world power. After eight long years of futile negotiations at the WTO, it is time for a different approach.
FamilySecurityMatters.org Contributing Editor William Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council in Washington, DC. E-mail him at HawkinsUSA@aol.com.
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