RALEIGH – Although most of the post-election talk about electoral and partisan realignment has been hooey – just as it was when exuberant GOP operatives talked about a “permanent Republican majority” in recent cycles – there is a trend that was codified in the 2006 outcomes. The trade issue has become partisan.
We’ve gone through periods of consensus and periods of partisanship on free trade throughout American history. In the 19th and early 20th centuries, the Republicans were the protectionist party. Representing manufacturing interests who wanted to restrict consumer access to better or less expensive foreign goods, Republican presidents and members of Congress consistently sought higher tariffs – meaning, actually, higher taxes. Democrats typically favored lower tariffs and greater economic freedom (too bad that wasn’t accompanied by a commitment to freedom for everyone, particularly in the South).
The role that trade restrictions played in the global economic downturns of the early 1920s and throughout the 1930s helped discredit the old mercantilist arguments for protectionism. A bipartisan consensus for trade liberalization emerged after World War II, challenged primarily by labor unions and a few holdovers from earlier times, mainly among sheltered businesses and isolationists. The consensus broadened and deepened during the 1970s and 1980s, in part because pro-protection industries and interests had declined in economic and political significance and in part because a flood of academic studies confirmed the net benefits of expanded trade.
When Bill Clinton was elected president in 1992, he ran as a trade advocate, not a protectionist. His administration negotiated the North American Free Trade Agreement and set the stage for subsequent trade deals. His economic advisors and Cabinet secretaries embraced the global economy. His vice president, Al Gore, famously debated – and slaughtered – Ross Perot on NAFTA during Larry King’s CNN talk show.
My, how things have changed. The majority of votes in Congress for the Clinton administration’s trade policies came from Republicans, but there were also Democratic votes. These were bipartisan measures. No more. Democrats have become increasingly protectionist, while GOP members who used to vote that way have either left Congress or joined the free-trade caucus. Now that there is a Democratic majority in both houses of Congress for the first time in 12 years, the partisanship of trade policy is again noticeable. For the first time in many more than 12 years, there appears to be something like a majority on Capitol Hill for slowing trade liberalization, and perhaps even for repealing some prior agreements.
It’s understandable. Free trade is indisputably good for the vast majority of people in any society, industrialized or developing, because it allows them to use comparative advantage in production to get high-quality goods at the lowest possible price. But comparative advantages fluctuate. Markets are dynamic. A given individual or firm may be best at something today but, comparatively, not the best tomorrow. It can be a painful or jarring change to adjust to these changing conditions, and some will respond not by making the necessary adjustments – moving capital, going back to school to learn new skills, possibly moving to other communities where economic opportunities beckon – but by lobbying politicians to keep their customers captive. Forcing competitors out of business is no long-term solution. It’s no way to build a healthy, productive economy. It can make short-term political sense, though not always.
I’d be more worried about the Democrats’ lurch towards economic illiteracy if I thought Congress had the power meaningfully to restrict the advance of global capitalism. I don’t. It can muck things up on the margins, sure, but that’s about it. Michael Mandel is economics writer for the Democratic-leaning magazine Business Week (that’s right, if you want a Republican-leaning business mag, try Forbes). In his latest cover story, Mandel argues that international competition has become an unstoppable force. “The idea of a national economic policy may be fundamentally out of date in a world of global markets,” he writes. “Washington is no longer the center of the economic universe. That’s a basic fact that Democrats and Republicans alike will need to get their heads around.”
Well, they’ll need to get their heads around it if they want to do something other than demagogue the issue, yes.
Hood is president of the John Locke Foundation.