Cato Online Forum

Free Trade Is Under Attack, and It Must Be Defended

By Brian Doherty
April 2017

Twentieth century American libertarians admired and relied upon few pre-20th century thinkers more than the 19th century French economic journalist and polemicist Frédéric Bastiat. From the 1940s on, they have spread his witty reductio ad absurdum arguments in defense of the wealth-creating wonders of free trade among persons and institutions, regardless of the national borders that separate them.

His arguments were so compelling that libertarians risked fooling themselves into thinking they’d cleared the intellectual and political field. Who could argue that getting more of what we want for less money or effort was a bad thing? How could we possibly go to great effort as a nation to stop that, via so-called “protectionism”?

Bastiat’s classic ironic essay “Petition from the Manufacturers of Candles” exposed trade protectionism as deliberately beggaring humanity, stealing abundance in order to give special benefit, via force, to a narrow range of the politically connected. Bastiat also wisely noted in that essay that trade protectionism doesn’t even deserve to be called a system or theory or principle — it is merely a brute, dumb practice.

Bastiat’s vast appeal to libertarians is rooted in the abundance markets create. Libertarians love freedom, but not merely for its own sake. The libertarian vision sees freedom, and free trade, as key components of a rich, varied, and rewarding life, of making human life just plain better — more satisfying and option-filled and ultimately joyful. Moral correctness and practical betterment usually dovetail gloriously in the libertarian worldview thanks to the wealth-generating power of free markets.

The cause of political liberty could be imagined as a seemingly disconnected list of different policies, varied areas where government action ought to be restricted, or ended, or changed, different aspects of life into which it should not reach, different ways it should reduce its grip on our lives and its command of our resources via spending and taxation (with the former leading inevitably to the latter).

But Bastiat’s example was central to so many libertarian educators for so long because free trade was indeed intellectually foundational to their understanding of how the world works. Free trade is what makes liberty conducive to overall human flourishing (while of course never guaranteeing that any specific individual will “win” in the Trumpian sense).

Bastiat’s arguments and focus on trade protectionism were also importantly shaped and influenced by the political experience of England’s Richard Cobden and John Bright. Together they achieved an impressive feat of libertarian policy advocacy of the 19th century: the Anti-Corn Law League and its success in overturning many tariffs on grain. Actual political battles can be and have been won in free trade, mostly because it truly does benefit the mass of Americans — and humans.

It was not just that example of political success that made free trade central to the libertarian vision. To understand why free trade was good was to understand why civilized free association made human life richer and better, why the liberty inherent in free markets tended to magnify the wealth and opportunity of everyone, everywhere. Failure to understand that proved that the core of liberty — that people own their labor and effort and should be free to choose with whom they contract and trade — was outside one’s ken.

The economic and moral case for free trade of goods, capital, and labor across borders is so strong, and so core to the libertarian vision, that any politician, party, or group that professes to further the cause of liberty and does not understand and advocate it cannot be relied on as an intelligent ally.

In year one of the Trump administration, then, the greatest challenge facing political liberty is rewinning support, either popular, or elite, or preferably both, for this core free market principle. Free trade very recently was central to the free-market image of Trump’s party, the Republicans, but they mostly seem to have shed it in service of propping up their president’s agenda, or in search of tax solutions, like a border adjustment tax, that they can sell as harming only “them” and not us.

From the moment he declared his candidacy, Trump’s highest priority seemed to be forceful interference with the free movement of goods, services, and people across the American border. His reasons were based in either unreasonable fearmongering over a very small risk (when it comes to immigrants), or a misunderstanding, or a pure rejection, of the principle that people should be able to trade their property and labor as they wish with minimal interference from the state.

Trump didn’t even wait until he was sworn in to begin threatening businesses who dare use their capital outside the American border. Chiefly he sought punitive taxes and sought to use the government’s power of special favors to cajole companies into not doing so. In his inaugural address he cut to the point with a clarity that was brutal and frightening to those who understand free trade as the cornerstone of liberty and worldwide wealth: “We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs,” Trump said. “Protection will lead to great prosperity and strength.”

Elites clearly not understanding or believing that free trade is good overall for America and the world is more alarming than their merely violating the principle on the margin, as the U.S. government has always done. The dominant ideology of both American political parties now considers international trade at best a sometimes necessary evil. While libertarians are properly skeptical of the state management involved in international trade agreements, make no mistake: Trump is hostile to these agreements not because they overly manage Americans’ liberty, but because they offer Americans liberty in the first place.

He is hostile to trade agreements because he thinks buying “too much” from overseas means that in some ill-defined sense America is “losing.” (Trump’s trade guru, Peter Navarro, wants to manage our trade by means of bilateral deals that he hopes can literally demand that partner countries buy certain amounts from us, a pointless mucking with the free flow of choice, capital, and labor, again designed to benefit a protected class at the expense of everyone else.)

Trumpian attitudes and policy disrespect the facts as well as disrespecting American economic liberty. Most of the ills Trump wants to attribute to trade — such as loss of manufacturing jobs — won’t be solved by making international trade more expensive or complicated, and are far more caused by automation (which is also good) than trade.

Only about three percent of the huge churn in job destruction and creation in our dynamic economy can be meaningfully attributed to overseas competition, and in general our unemployment rates tend to fall as our trade deficit rises. Our GDP growth and trade deficit growth also tend to rise together — the latter is no inherent problem for Americans’ whose cumulative choices involve them sending more dollars overseas in exchange for goods than vice versa.

How is this challenge to free trade to be met? The task of education in facts and principles, for elites or a wider public, is always difficult and never finished. Milton Friedman told me when I was younger that the same intellectual battles will be fought forever; the same good and bad ideas will remain eternally in circulation and in combat. Like much of what he said and wrote, his claim has become more clearly true with time.

But it remains libertarians’ task to extend and retranslate in contemporary terms the understanding of economists from Adam Smith, through David Ricardo, through Ludwig Von Mises. They knew about the wealth-generating properties of trade; how and why protection can never be for the general good but only for that of a politically protected class (the opposite of the message Trump spreads); that it must inevitably harm both consumers and other producers as it tries to help some producers; that merchandise trade deficits are nothing to build expensive and damaging national policy around as they are, in the grand scheme of things, “balanced” via capital inflows; that “foreign” capital via dollars sent overseas for goods returning to us as investment is vital to wealth and productivity; that millions of jobs only exist because of international trade. Global trade chains make access to imports a vital aspect of both domestic production and exports for American companies and workers. Disrupting them with Trump’s belligerent insistence on “winning” will beggar us all.

For the world at large, the international division of labor often condemned as “globalization” has over the past few decades led to the widest, grandest lifting of the largest number of humans from the grips of dire want in history, with absolute poverty having fallen in half in the past 30 years and the global middle class welcoming nearly 2 billion new members.

The current administration openly and crudely denies all that, or ignores it as unimportant. The men making its decisions may not be educable. But one has to hold out hope the larger public and political class are.

As Daniel Griswold wrote in the Cato Institute book Mad About Trade (2009), “those of us who advocate the embrace of free trade and globalization as the best policy for America…[must draw] a connection from the facts to our deepest American values of fairness, compassion, competition, freedom, progress, peace, and the rule of law.”

That’s it right there: the full vision of civilized, wealth-enhancing liberty, the understanding that free exchange in a realm of private property — the very core of “free market economics” — continues to fulfill human needs and reify human choice whether it’s with the man next door, in the next city, the next state, or the next continent. This understanding that free markets lead to the widest possible enrichment of the most people, and that it is not government’s duty or right to interfere with those markets, is not just one policy issue among many. It’s the heart of libertarianism, and it is, for now, rejected with open and ignorant hostility by the regnant regime. The near-term future of American liberty rests on the ability to be convincing on the moral and prudential benefits of free trade.

In honor of the fortieth anniversary of our founding, the Cato Institute has organized a special online forum on the future of the free society. Join the conversation on Twitter with #Cato40, and follow the hashtag for updates.

Brian Doherty is a senior editor at Reason magazine and the author of Radicals for Capitalism: A History of the Modern American Libertarian Movement, as well as Gun Control on Trial and This Is Burning Man.