It may seem eccentric to go after Donald Trump on trade policy. When a candidate quotes Mussolini, hesitates about disavowing the KKK, changes his line under pressure and then falls back on his trademark bluster, you might think he has more obvious disqualifications from office. But protectionism is the key to Trump. It explains his popularity even as it proves his unfitness.
What’s the one thing that everyone can tell you about the Donald’s manifesto? That he wants to build a wall, right? He mentions it at every rally, and likes to leave his audience with a clear mental image. “A wall is better than fencing, and it’s much more powerful. It’s more secure. It’s taller.”
That image appeals to something deep in our psyche, namely the desire to defend territory. Some years ago, a British insurance company ran a TV advert with satellite images of the Great Wall of China, the pay-off line being that the oldest human instinct was “the desire to protect.”
Although the word “protect” has positive connotations, the word “protectionism” has not, and for good reasons. Every country that has tried it has paid a price. While tariffs might temporarily benefit one industry, the cost to the rest of the economy, especially to the poor, is always higher than any such gains. Does Trump not know this, or does he not care? It’s hard to say.
Two weeks ago, he said he’d “send cease and desist letters” to China, Mexico and other countries that he felt were “ripping us off.” He added, “And when I say cease-and-desist orders, maybe it’d be equivalent. Maybe I’ll do it with my mouth.”
Plenty of people, in every age and nation, will cheer such sentiments — the loudest cheers often coming, paradoxically, from those who would suffer the most if they were turned into policy. The trouble is that free trade is counter-intuitive. Comparative advantage — the idea that it is beneficial to trade with a country which is more efficient than yours — has been called “the only idea in all the social sciences that is both surprising and true.” More than 200 years have passed since David Ricardo demonstrated why, logically, a country must always and everywhere benefit from removing tariffs. But every subsequent generation has struggled with the notion.
The worst of it is that trade deals, these days, are at least as much about standardization as they are about liberalization. It’s noticeable that the Trans-Pacific Partnership which Trump rails against doesn’t contain the words “free” or “trade” in its title. Neither does the EU-U.S. deal currently being negotiated, the Transatlantic Trade and Investment Partnership.
While both deals contain welcome tariff reduction elements, they also contain a great deal of corporatism. Big companies and cartels know that they can use talks like these to get rules that suit them but hurt their smaller rivals. They don’t put it like that, of course. They talk about the need to protect labor and environmental standards. But it’s what they mean.
As Iain Murray of the Competitive Enterprise Institute puts it, “This undermines the very principle of free trade, which is based on comparative advantage. Harmonization of standards reduces the advantage of one nation over another, and thus penalizes all parties to an agreement.”
The spread of free trade has arguably been the single happiest fact of the past 60 years. It has led to an unprecedented fall in global poverty as previously closed economies joined international markets. It has coincided, too, with the most peaceful era in human history, because the dismantling of trade barriers makes the physical ownership of resources less relevant. “Free trade shall draw men together, thrusting aside the antagonism of race, creed and language, and uniting us in bonds of peace,” said the Victorian radical Richard Cobden. And, broadly speaking, it has.
Which is why the prospect of a Clinton/Trump contest is so unutterably depressing. The former is a know-it-all managerialist, whose solutions always involve more experts, more technocrats, more laws. The latter is a ham-fisted interventionist. OK, maybe I should rephrase that, Trump being hyper-sensitive about his hands. Let’s just call him an aggressive mercantilist. Either way, the nation that led the way to freedom and free markets looks likely to go into reverse — with harmful consequences for the world economy. Please, cousins, don’t do this to us.
Dan Hannan is a British Conservative MEP.
