President Trump said as a candidate in 2015 that the United States needed “fair trade, not free trade.” But this week, the country is moving in the direction of both with the European Union, he and has deputies have declared.
Trump exclaimed after meeting with EU chief Jean-Claude Juncker that Wednesday was a “big day for free and fair trade!” And Treasury secretary Steven Mnuchin followed him up Thursday morning by claiming that the administration doesn’t “want tariffs,” but “free and fair trade, so we’re working on an agreement toward zero tariffs, zero non-tariff barriers, and zero subsidies.”
As it is with chasing fireflies, where the administration’s trade policy falls next on the political spectrum is a guess. In a formal forum like the State of the Union address, Trump has said he believes “strongly in free trade, but it also has to be fair trade.” On Twitter, he’s said that “trade wars are good, and easy to win.” These statements seem inspired by different mentalities. In execution, however, it’s apparent that the White House is run by an eager protectionist, checked in principle but hardly in practice by a Republican Congress. He seems open to penalizing any nation for any reason, including a spurious one of national security.
If this is what passes for the pursuit of “free and fair trade,” then Trump’s predecessor Ronald Reagan may have liked a word. It was Reagan who popularized that phrase throughout the 1980s, as he battled Democrats on Capitol Hill over how to address rising trade deficits and unfair trading practices alleged in Europe and East Asia. The Reagan administration was avowedly free-market: “[W]hen it came to evolving the formal trade ‘white paper’ presented to Congress” by Reagan’s trade representative William Brock in 1981, “the most ardent of the administration’s free-traders had to fight hard to change the proposed wording from advocacy of ‘free and fair trade’ to simply ‘free trade,’” the Washington Post reported at the time.
But in the years that followed, the former phrase ultimately won out. Reagan faced pressure from U.S. automakers and the steel industry to respond to Japan’s car exports and subsidized raw materials in Europe that domestic manufacturers could buy on the cheap. Mere pragmatism demanded some sort of action. So here is how Reagan framed it in a weekly radio address in November 1982:
We are reminding our trading partners that preserving individual freedom and restoring prosperity also requires free and fair trade in the marketplace. The United States took the lead after World War II in creating an international trading and financial system that limited governments’ ability to disrupt free trade across borders. We did this because history had taught us an important lesson: Free trade serves the cause of economic progress, and it serves the cause of world peace.
When governments get too involved in trade, economic costs increase and political disputes multiply. Peace is threatened. In the 1930’s, the world experienced an ugly specter—protectionism and trade wars and, eventually, real wars and unprecedented suffering and loss of life.
There are some who seem to believe that we should run up the American flag in defense of our markets. They would embrace protectionism again and insulate our markets from world competition. Well, the last time the United States tried that, there was enormous economic distress in the world. World trade fell by 60 percent, and young Americans soon followed the American flag into World War II.
I’m old enough and hopefully wise enough not to forget the lessons of those unhappy years. The world must never live through such a nightmare again.
Reagan acted on his own periodically: In ’83, he appointed an industrial council headed by Hewlett-Packard chief John Young as an alternative to a national industrial policy; in ’84, he directed Brock to negotiate voluntary steel export quotas to protect domestic production; in ’85, he ordered an investigation into various South Korean, Japanese, and Brazilian trade practices; in ’87, he slapped punitive tariffs on certain Japanese-made equipment and electronics for continuing to “dump” computer chips in foreign markets for below-market value while closing off American chip exporters to the Japanese market.
It wasn’t until 1988, however, that he signed a major trade package compromise, which was sponsored by Democratic Ways and Means chair Dan Rostenkowski. Protectionist Democrats like Dick Gephardt and even certain Republicans from textile-manufacturing states in the South and Northeast had pressed for more ambitious moves. But Reagan held his ground: He vetoed a bill in 1985 that would have slashed textile and apparel imports from Asia and put quotas on foreign-made shoes and vetoed a similar measure in 1988. That same year, he vetoed a stricter version of the Rostenkowski legislation backed by Gephardt.
This was a balancing act. But it was apparent that the “free” came first in Reagan’s version of “free and fair trade. “We’re in the same boat with our trading partners. If one partner shoots a hole in the boat, does it make sense for the other one to shoot another hole in the boat? Some say yes and call that getting tough,” he said. “Well, I call it stupid.”
And almost certainly not “free and fair.”
