Review: The Long Route to Free Trade

By George Melloan, Wall Street Journal, Nov. 28, 2017 6:53 p.m. ET

Tracing the evolution of trade politics from mercantilism to the present, when Donald Trump has made trade controversial again. George Melloan reviews ‘Clashing Over Commerce’ by Douglas A. Irwin.


In 1789, James Madison addressed the first congress of the new American republic with these words: “I own myself the friend to a very free system of commerce and hold it as a truth that commercial shackles are generally unjust, oppressive and impolitic.”

His free-trade views fitted the times. The American colonists had just waged a war to escape the trade burdens imposed by a mercantilist English ruling class. The Navigation Acts, enacted in the mid-17th century, required that colonists trade through Britain. The Tea Act of 1773 attempted to give the East India Co. a monopoly in the American colonies, a move that provoked the Boston Tea Party, ancestor of today’s libertarian tea party.

Fast forward and after over two centuries of ups and downs in trade politics, Americans have opted for the Madisonian view. The average duty on imports, after a relatively steady decline over the past 80 years, is now negligible. A 2017 Gallup Poll showed that 72% of Americans see trade as an opportunity and only 23% as a threat. The U.S. benefits from a modern global “free system of commerce” brought about by the North American Free Trade Agreement of 1993 and the comprehensive 1994 “Uruguay Round” multilateral compact, which broadly reduced barriers and liberalized international trade.

In “Clashing Over Commerce,” Douglas Irwin, a professor of economics at Dartmouth, outlines this long evolution of trade politics from the mercantilist 1640s to the present, when Donald Trump has made trade controversial again by arguing for a renewal of protectionist policies. Mr. Irwin’s chronicle—lengthy, detailed and readable—traces the winding trail that has brought us to the liberal world trading order we enjoy today.

Modern protectionist rhetoric didn’t begin with Mr. Trump, of course. Barack Obama used it to win labor votes during the 2008 campaign. Mr. Irwin quotes Mr. Obama declaring: “We can’t keep passing unfair trade deals like NAFTA that put special interests over workers’ interests.” In office, he took a more liberal stance.

The early U.S. congresses favored free trade and levied tariffs only as the most efficient way to gain revenues, since they could be collected by merely a few customs officers in Boston, New York and Philadelphia. But industrialization brought demands from Northern factory owners and their congressmen for high tariffs to protect “infant industries,” like iron smelting. Protective tariffs on dutiable items soared in the mid-1820s to as high as 60%.

Mr. Irwin doesn’t find strong evidence that tariffs actually promoted development, but they certainly sowed conflict between North and South. Southern congressmen complained that tariffs were hurting the lucrative cotton export business by making it more difficult for Europeans to earn dollars with exports to the United States. South Carolina’s first threat to secede, in 1832, was made in objection to Northern tariffs. The Civil War crushed the South’s trade arguments and brought in a long period of Republican rule and protectionist policies.

The Republicans finally went too far with the 1930 protectionist Smoot-Hawley Tariff Act, which brought a precipitous drop in U.S. foreign trade and played a role in the Great Depression. When it comes to assigning blame for deepening the Depression, Mr. Irwin faults Smoot-Hawley less than the Federal Reserve’s policies. He endorses the view, advanced by Milton Friedman and Anna Schwartz in the 1960s, that the Fed mishandled the deflation of the early 1930s by failing to increase the money supply. He notes, however, that the late monetary specialist Allan Meltzer gave Smoot-Hawley more of the blame. Of course, both the Fed and Congress earned low marks.

In 1932, voters cast the offending Republicans into the outer darkness, where they would live for 20 years, and the New Deal’s Reciprocal Trade Agreements Act of 1934 ushered in a series of bilateral agreements that gradually improved America’s trade posture. The act also, Mr. Irwin notes, gave the president a greater role in negotiating deals.

After World War II, both political parties saw it as imperative to rebuild Europe in order to ward off Russian imperialism. The General Agreement on Tariffs and Trade, in the late 1940s, set up a new trade framework, and American investment flowed into Western Europe, launching a new wave of internationalism. In the mid-1960s, negotiations began on what came to be known as the Kennedy Round, introducing an era of broad trade-liberalization agreements.

By the 1990s, in another twist, the Republicans had become the dominant free-trade party, and it served them well. Democrat Bill Clinton was well disposed toward free trade, but his party, more heavily wedded to protectionist unions, was less so. In 1993, the Nafta agreement passed Congress but only with the help of 132 Republican votes in the House and 34 in the Senate.

So where are we today? Mr. Obama supported the Trans-Pacific Partnership negotiations that began in 2011 and, a couple of years later, the Transatlantic Trade and Investment Partnership. In 2017, Mr. Trump dropped out of both and began his attack on Nafta. That stance has earned him strong opposition from the farm and auto lobbies, both of which profit from an integrated North American trading system.

Today’s question is whether Mr. Trump represents a turning away from free trade by Americans. The polls that Mr. Irwin cites suggest not. He finished his book at the outset of the Trump presidency and wasn’t sure how much Trump talk was serious and how much bluster. Although he doesn’t say so outright, he implies that he is still hopeful about preserving a liberal trade order, despite Mr. Trump. Certainly James Madison’s argument for it is still sound.

Mr. Melloan, a former deputy editor of the Journal editorial page, is the author of “Free People, Free Markets: How the Wall Street Journal Opinion Pages Shaped America.”